Chip’s new savings account: Is it any good?

The easy-access rate offers a “market-leading” 3.4% interest.

Since its launch, the finance app Chip has regularly offered higher interest rates than most, if not all, providers.

The latest account – Chip Instant Access – launched in November 2022 with a 2.55% rate. That could be beaten, but the return has now increased to 3.4% which is a table topper (for now at least).

That certainly sounds good, and I’ve already had loads of people asking if they should move their money. For a simple savings account I’d say yes. Here’s my analysis.

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What does Chip’s new savings account pay?

You’ll be able to earn 3.4% AER on up to £250,000 saved in the account. Chip says this rate could rise again if the Bank of England increases the base rate in 2023 and I’ll update here if it is.

You’re not actually earning interest via Chip. Instead you get a ‘reward’, and as explained in a bit, will work differently to interest earned in a normal savings account.

* Update 12/2/23 – Since 11 February 2023, Chip’s instant access account works like a normal savings account. This means the issues written about below are no longer something to worry about.

Is it free to use?

It’s worth noting that unlike some other Chip savings accounts there are no charges to withdraw money form this account.

If you choose to use it for auto-savings, then there will be extra costs. I’ve detailed them in my full Chip review.

Why it’s not like other savings accounts

There are a few differences, such combined they could actually impact the real rate you earn. Here are the key factors to weigh up.

The reward doesn’t compound

*This won’t be the case from 11 February 2023*

This basically means that the bonus you earn won’t itself also earn bonus payments. This is unusual as most accounts do pay interest on interest.

Whether this is an issue or not really depends on how much you have saved with Chip.

This table shows the typical bonus you’d get on a 30-day month, and how much you’d earn if you transferred that cash each month to a 5% paying regular saver so it did earn some interest.

Amount saved	Chip 30-day bonus	Annual interest if moved to a 5% regular saver
£1,000.00	£2.38	£1.00
£5,000.00	£11.92	£4.00
£10,000.00	£23.84	£8.00
£15,000.00	£35.75	£12.00
£20,000.00	£47.67	£15.00
£30,000.00	£71.51	£23.00
£40,000.00	£95.34	£31.00
£50,000.00	£119.18	£38.00
£85,000.00	£202.60	£65.00

For smaller amounts you might decide it’s not worth faffing around with the withdrawals (more on this in a bit), but for big deposits, it could make sense to earn the extra cash elsewhere.

The reward isn’t protected

*This won’t be the case from 11 February 2023*

Though your main savings are fine, the return won’t be protected by the Financial Services Compensation Scheme. So if Chip, or ClearBank which holds your cash, were to go bust, you’d lose that additional money.

Withdrawing the reward

*This won’t be the case from 11 February 2023, though after this date you’ll need to take all your money out to access any reward payments made prior to the change*

Since this reward doesn’t compound and isn’t FSCS protect, you’ll probably want to take the bonus out every month when it’s paid. Sounds simple enough.

But to access the reward you will need to take out ALL your money first. So the reward will be the last cash you’ll take out each month, and will hit your external account the next working day.

If you want to keep saving with Chip you’ll then need to deposit all your cash again – and that’s not simple either.

Paying money in

When you add money it’ll take up to three working days for the cash to reach the account. And you don’t start earning the 2.9% rate until that happens. So you’re losing at least 3 days of interest each time you add money. If it’s over the weekend or a bank holiday then you could add a few more on top!

This is particularly relevant if you’re taking money out every month to access your bonus and then paying it back in. Doing it will reduce how much you earn, and the effective interest rate.

Assuming you do it every month, that’s 36 days of interest you lose. And let’s add on another 6 to cover three months where it might be delayed by a weekend. Here’s how that looks.

Amount saved	Chip annual bonus	Chip annual bonus if redepositing cash every month
£1,000.00	£29.00	£25.66
£5,000.00	£145.00	£128.32
£10,000.00	£290.00	£256.63
£15,000.00	£435.00	£384.95
£20,000.00	£580.00	£513.26
£30,000.00	£870.00	£769.89
£40,000.00	£1,160.00	£1,026.52
£50,000.00	£1,450.00	£1,283.15
£85,000.00	£2,465.00	£2,181.36

So in this example, the real rate you get on that cash is closer to 2.56%! Even when you add in how much you’d make by moving the monthly bonus into a higher-paying regular saver, you’re still earning less than if you just left the cash in there! However, you then need to consider the risk of having your bonus not protected by the FSCS.

How other savings accounts compare

The 3% AER from Chip is a better rate than the next closest full easy-access accounts at the time of writing. The nearest are:

• Zopa: 2.86% (minimum of £1)
• Al Rayan: 2.81% (minimum of £5,000)

Remember though that these account will offer compound interest and the interest is FSCS protected on top.

However, you can get better rates from accounts with some limitations on things like maximum balance and how often you can access the cash. The top ones include the following:

• Barclays Blue Rewards Rainy Day Saver: 5.12% AER on up to £5,000 (subject to Blue Rewards terms – full analysis here)
• Santander Edge: 4% AER on up to £4,000 (subject to £3 monthly fee – full analysis here)
• HSBC online bonus saver: 3% AER on up to £10,000 (as long as you don’t withdraw in a given month)

Plus there are regular savers paying even more (up to 7% right now), though you’re limited to smaller deposits each month.

So if you have large sums of money, at the time of writing you can’t get a higher rate of interest than what Chip offers. You can get updates on all the latest savings accounts here.

Should you get the new Chip account?

How to get the new Chip savings account?

Chip is an app-only product, so you need to have a smartphone to sign up and access the account. Choose the free membership tier and then open up the Chip Instant Access Account.