Despite dodgy online banking access, TSB’s Classic Plus Account still offers something many other banks don’t – high interest on savings. But is it worth the risk?
Back in May one of the biggest banking fiascos of the last few years saw TSB customers locked out of apps and online banking for days, even weeks. Many couldn’t make any payments, getting hit with fees or losing out on purchases they need to pay for. TSB said no one would be out of pocket, and there have been thousands of complaints from angry customers. Yet it seems most customers have stayed with the bank – and that includes me and Becky.
Well, it’s just happened again. So far it’s only been for a few days, and not everyone is impacted, but it’s a huge frustration for many customers. One of those is Becky, who received a text today saying there weren’t enough funds in the account to cover requested payments. That shouldn’t be the case as we only have standing orders in and out of our TSB accounts. But she couldn’t access her account to check. So we’ve had to transfer some money over just in case – no knowing when we’ll be able to transfer it back out again! And we’re lucky we’re in a position where we can do that.
Time to quit? Well no. Even this latest technical cock-up isn’t enough to convince me to switch away. But that doesn’t mean I’m complacent. And you shouldn’t be either.
Here’s why I think it’s still worth having an account (or two) with the bank, and when it might be time for you to take your banking elsewhere.
You shouldn’t have TSB as your main current account
This should be pretty obvious. The technical failure was bad enough, and the way the bank handled it was appalling. For it to happen again is a sure sign you can’t rely on this bank – at least not at the moment.
This doesn’t mean you have to switch away. When you switch you close your old bank account. But there’s no limit to how many accounts you can have with different banks, and there are advantages to doing this too. I’ve currently got 13! There are plenty to pick from.
So you can open up a new account at a different bank and have that as your main account. Get your salary paid in here, maybe even move your standing orders and Direct Debits across. You can then keep some money in TSB (more on why in a moment) so if you lose access to one account, you can still get online elsewhere.
Even if you’re not currently with TSB I’d recommend opening up a second bank account as you shouldn’t take any bank for granted. TSB’s malfunction occurred while the bank was migrating to a new IT system, but every bank is potentially at risk of a meltdown or hack. So having all your money in one pot is bad idea, though particularly with TSB right now.
Here’s my video from May sharing my three ways to protect yourself from bank IT disasters
But it can be worth having a TSB account as well as an account elsewhere
Interest rates are poor right now. Despite the Bank of England increasing the base rate of interest to 0.75%, you still can’t get much more than 1% with most easy access savings accounts. And many banks will offer something pitiful like 0.05%, if anything at all.
But TSB’s Classic Plus account will give you 5%. You can’t get higher than this right now. There are restrictions though. The biggest is that you can only earn interest on balances up to £1,500. But over a year that’s still worth £75 a year.
You can triple up on that if you’re in a couple, as both of you can have an individual account and you can add a joint account as a third. Obviously you need £4,500 in savings between you, but that’s a possible £225 a year in interest.
Though Nationwide offer 5% on balances of up to £2,500, it’s only for the first year. So for medium term (i.e. more than one year) savings then you’ll struggle to get a better return than the TSB Classic Plus.
You also need to pay in £500 a month, which should be achievable for most people, and sign up for internet banking paperless statements and paperless correspondence.
It’s worth noting that this decent rate is the result of the first IT fiasco. TSB’s rate was actually cut to 3% in 2017, and only hiked back to 5% as an apology and to try to stop people moving away. Well it worked as that was enough to keep me with the bank.
No savings? Then you might want to switch away from TSB
Having said this, there’s no point staying with TSB or opening an account with them if you don’t have any savings. You can get £185 in M&S vouchers by switching to M&S Bank or a £150 Expedia voucher if you move to First Direct. You can read more about these and other bank incentives in my regularly updated guide.