Starling Bank scraps 3.25% current account interest from February worth up to £162.50 a year – here’s why

Starling Bank is removing its popular checking account interest feature, This is Money can reveal.

The digital bank will stop paying all customers 3.25 percent interest on their current account balances starting February 10, 2025 and will eliminate the benefit entirely.

Currently, Starling current account customers receive bonus interest on their current account balances of up to £5,000.

Starling raised its checking account interest rate just over a year ago, before that it had been paying 0.05 percent since 2017.

If a balance of £5,000 was maintained in the current account and the interest rate remained at 3.25 per cent, customers could earn £162.50 in a year.

A Starling Bank spokesperson said: “We continually keep our products under review and have made the decision to remove current account interest from February 10, 2021.

‘Over the past few weeks we have notified all customers of the new Starling current account terms and conditions.

“Customers will continue to benefit from free spending abroad and 24/7 customer service.”

New and existing single and joint current account customers will continue to earn interest on balances up to £5,000 until 10 February 2025.

It comes as This is Money revealed Starling will launch a 4 per cent easy access account, linked to her current account from the end of this month.

This is Money understands that the first customers were able to open the Easy Saver account this week and it will be rolled out to more customers throughout the week.

The Easy Access account will only be available to Starling’s sole checking account customers when it launches, not joint account holders.

Over the summer, digital rival Chase eliminated its 1 percent checking account interest in favor of a temporary 1 percent increase on its easy-access account.

At the time, James Blower, director of Savings Guru, said: ‘Paying interest on credit on checking accounts will be less profitable for Chase in a falling interest rate environment.

“This is a cost-effective way to potentially attract additional savings balances now, but pay a lower rate when the bonus expires.”

Most banks don’t pay interest on checking account balances, so removing this attractive feature takes some of the shine off Starling as a disruptive digital challenger.

Where else can you earn interest on checking account balances?

Starling has the most attractive rate on the market for larger checking account balances.

Nationwide FlexDirect Account Pays a fixed 5 per cent interest on current account balances for the first 12 months of opening the account, but only up to £1,500.

Customers who keep that balance in their account at all times could earn up to £75 over the year.

The rate drops to 1 percent when the 12-month introductory period ends.

Customers must deposit at least £1,000 a month into the FlexDirect account to receive the 5 per cent credit interest rate and subsequently the 1 per cent rate.

Kroo Digital Bank It also offers interest on balances held in your checking account.

Kroo pays 3.65 percent on checking account balances. This rate is 1.1 per cent below the Bank of England’s base rate, which currently stands at 4.75 per cent.

If the base rate were reduced to 4.5 percent, for example, Kroo’s lending rate would fall to 3.4 percent.

Kroo can also widen the margin remaining below the base rate at any time.

There is no minimum monthly deposit required to receive checking account interest.

Santander Edge Up current account It comes with 3 per cent interest on current account balances up to £25,000.

But some of the interest will be absorbed by the £5 monthly fee that comes with the account.

The Edge Up account also includes 1 per cent cash back on essential spending such as shopping and travel (capped at £15 per month) and 1 per cent cash back on household bills paid by direct debit.

Santander currently pays a £150 switching bonus to customers who move their current account to its Edge Up current account.