High street bank TSB has today slashed the headline interest rate it pays on its Classic Plus current account from 5% to 3%.

The cut, which was announced in October and affects both new and existing customers, means that you'll now earn 3% on a maximum of 1,500 in the account, down from 5% on up to 2,000.

Over one year, you'll now earn a maximum of 44.40 in interest compared with 97.80 previously.

Take a look at our Best Bank Accounts guide if you decide to ditch and switch as a result of the TSB rate cut it's possible to be paid up to 150 for doing so.

Martin Lewis
Get Our Free Money Tips Email!

If your account works for you, don't ditch in anger

While it's a blow that the rate has been cut, 3% on 1,500 is not to be sniffed at in this low interest environment, and the TSB Classic Plus account still makes it into our best buys.

It currently also pays 5% cashback on the first 100 of contactless payments you make every month. This perk will last up to 30 September 2017, and can potentially add another 45 to your pocket this year.

If you're an existing customer, you could simply move anything above 1,500 that you have in the account to another high-paying account, while retaining 3% with TSB.

The previous rules around earning interest on the Classic Plus account still apply, meaning you'll have to pay in 500 each month and register for online banking and paperless correspondence to benefit from the 3% rate.

Where should I switch if I do decide to ditch?

It's slim pickings these days in terms of bank accounts that pay decent interest rates, but there are a few good options if you decide to ditch your TSB Classic Plus account:

  • Nationwide's FlexDirect pays 5% interest fixed for a year on 2,500 (1% after)
  • Tesco Bank's Current Account pays 3% on 3,000
  • Bank of Scotland's Classic Account with Vantage pays up to 3% interest on 5,000 (though you need at least 3,000 in there to get the top rate)
Full info can be found in our Best Bank Accounts guide.

Have your say