moneysupermarket.com: Lloyds TSB Vantage account

Commenting on the new Vantage current account from Lloyds TSB, Kevin Mountford, head of savings and current accounts at moneysupermarket.com, said: “Banks are continuing to pull out all the stops to get customers through the door. Lloyds TSB is the latest to join the fray, launching a current account paying interest of five per cent AER on balances of up to £7,000.

“However, as a tiered account, the great rate only applies to balances between £5,000 and £7,000. On anything up to £1,000 the interest is only 0.1 per cent, rising to 1.98 per cent for balances of £1,000 to £3,000, then 2.96 per cent for balances up to £5,000.

"A recent OFT survey (16 July, 2008) states that there are 64 million accounts in the UK, with 54 million active. Of these, 95 per cent have an average balance of less than £5,000, so the upper tier being offered five per cent AER via this account will only appeal to a niche, high net worth base.

“If existing Lloyds TSB customers switch bank account to the Vantage account from their Classic Plus account, they may end up worse off. The Classic Plus currently pays 3.93 per cent on balances of up to £2,500. Therefore, this account should only appeal to those with larger balances who cannot be bothered to set up higher-paying savings accounts.

"At five per cent the upper rate is not bad, but strictly speaking, there are better ways to manage money by sweeping excess funds into a high-paying easy access account."