Why is Lloyds Reducing the Interest Rate on their Current Accounts?

Written by Karen Bryan

I am getting increasingly furious with UK banks and building societies for reducing the interest rates paid to customers, despite no change in the Bank of England Base Rate.

I don’t remember receiving a letter from Bank of Scotland (part of the Lloyds Banking Group) about the rate reduction, I read on a finance website in mid April that the rate of interest paid on the Bank of Scotland Current Account with Vantage was being reduced from 2% to 1.5% on 1 July 2018.

On 24 April 2018, I received a letter from Lloyds Bank, informing me that the rate of interest paid on my Club Lloyds Account was being reduced from 2% to 1.5% from 1 July 2018.

The following day, I read on the BBC website that Lloyds Banking Group’s annual profit had increased by 23%.

How on earth can Lloyds justify reducing interest rates paid to customers, especially when the Bank of England Base Rate is rumoured to increase in May 2018.

I suppose the only answer is in order to increase pay to directors and the dividends paid to shareholders.

I was tempted to close my Lloyds Banking Group current accounts.

No point in cutting off my noise to spite my face by closing my Lloyds Banking Group high interest current accounts, when the highest rate I can find on an instant access savings account is 1.3%.

If I have the maximum balance of £5,000 in my Club Lloyds Account, at the new rate of 1.5%, I will earn £75 in interest. As I pay out £5 a month in direct debits to charities to fulfil the direct debit requirements, that leaves me with £15 in annual interest. However, having a Lloyds current account, gives me access to the Club Lloyds Monthly Saver which pays a fixed rate of 3% on a maximum monthly deposit of £400 and the Lloyds Monthly Saver which pays a fixed rate of 2.5% on a maximum monthly deposit of £250.

With the maximum balance of £5,000 in each of my three Bank of Scotland Current Accounts with Vantage, my annual interest at the new rate of 1.5 % is £225. Having a Bank of Scotland current account gives me access to Bank of Scotland Monthly Saver which pays a fixed rate of 2.5% on a maximum monthly deposit of £250.