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App-based banking

Top new current account & saving apps incl up to 5% interest

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Rosie | Edited by Johanna

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There's a new wave of banking and savings apps launching to give you a helping hand with budgeting, saving and generally managing your cash in a way traditional banks don't.

Most of these cool newbies on the block are app-based so if you're not smartphone-savvy (or indeed you don't have a smartphone) or you prefer to manage your money by phone or in branch, they won't be for you. Or if you're just after the best customer service, overdraft or switching freebie, go to our Best Bank Accounts guide instead.

App-based banking need-to-knows

Digital banking's on the up – almost 20 million people used a banking app last year, according to the British Bankers' Association, with 30 app transactions being made every second. Here's what you need to know before downloading one of the newbies...

What is app-based banking?

App-based banking is basically what it says on the tin: a way to bank using an app. Unsurprisingly, most (if not all) of these new companies are purely online or app-based.

That being said, most have in-app customer support, with dedicated teams on hand to offer assistance if you've any questions or issues. Some even work in Facebook Messenger, so you can talk to someone about your banking in between chatting to friends.

All of the apps we feature in this guide are free to download, though some have costs associated with running them, which we clearly explain in our best buys below.

If you're after the top bank accounts in terms of service, overdrafts facilities, linked savings accounts or switching bonuses see our Best Bank Accounts guide.

Quick question

Does it matter what kind of smartphone I have?

The apps can help with budgeting and tracking spending

I spent how much?

Although these apps aren't solely meant for budgeting, a lot of the ones we feature in this guide can also help with keeping your finances in check.

Many give you real-time notifications when you spend or save, something traditional banks don't do – so for example, if you bought something for £5 in Boots, you'd get an instant pop-up on your phone screen telling you what you've spent.

Another thing they can do is give you insights into your spending habits. This means you'll easily be able to see how much you spend in one particular shop each month (coffee addicts beware!), or more generally how much you spend on entertainment or travel.

This should make it easier to budget and keep track of your money, cutting the cloth where needed.

Your money's not always protected in the same way as a traditional bank

Before we get into what these apps do, let's talk about safety. When it comes to your finances, you want to be sure that your money's safe – so it's important to understand how your money's protected. UK-regulated banks like Barclays and Santander have the full £85,000 Financial Services Compensation Scheme protection (see more in our Savings Safety guide).

bak protection

Some of the apps we include below also have FSCS coverage, but a few don't. Instead, many digital banking apps have an 'electronic money' licence. This means they have to hold your cash in a bank account ring-fenced from their operating cash – this is normally with a big bank like Barclays or NatWest.

Should the digital bank go bust, assuming it's done things by the book, your money would be protected as it'd be in a separate account.

But there's an important caveat. If the bank or building society your money was ring-fenced in went bust, your money may NOT be protected. This is because it's not counted as a deposit, in the way that cash in a savings account would be, and so it's not as clear cut.

For providers featured in this guide, we tell you how your money's protected – it's up to you whether you want to take the risk of a big bank that's holding your money going under.

The bank accounts are cool and high-tech BUT you can often get better rewards elsewhere

One thing that many fintechs are trying to do is become a fully fledged bank, offering an alternative to the main high street players. Like their high street counterparts, they offer debit cards, overdrafts, direct debits, standing orders and more. These challenger banks sell themselves on their high-tech, easy-to-use features, but it's still worth being aware of the old-school names.

Many offer incentives of £100+ if you switch to them, or ongoing rewards like in-credit interest or cashback on bills, something that the challenger banks don't tend to offer. For full options of these, see our Best Bank Accounts guide.

Quick question

Can I switch to one of these new banks?

They can make saving automatic

Most of the new apps are designed with you, the customer, in mind. They have a lot of clever tech, which makes managing your money easy as pie.

In this guide we feature apps for saving, which can do things like calculate how much you can afford to save each week and automatically sweep money into a separate savings account – though you can always tell the app to save less if you're feeling the pinch, or move the money back into your current account if you need it.

This is intended to help you save without having to think about it, which should lead to higher savings building up.

See our Top Savings Accounts guide for the best savings accounts on the market.

It's easy if you lose your card or forget your PIN

If you're banking with a traditional bank and you misplace your debit card or can't remember your PIN, it's traditionally involved calling up to cancel the card or waiting for a new PIN reminder in the post.

New banks are making it easier to manage if you lose your card or have a lapse of memory – they tend to let you freeze or unfreeze your debit card with the touch of a button, and can give you PIN reminders in-app. You'll still need to enter a passcode or use touch ID to get into the app, though, anyone can't just use your phone and steal your PIN.

So no more cancelling your card and then finding it seconds later at the bottom of your bag...

Want an overdraft? You'll need to pass a credit check

MSE’s Credit Club

All of the providers featured in this guide perform what's called 'Know Your Customer' (KYC) checks – this means they need to prove you're who you say you are when you apply, and will often ask for proof of identity and address. These ID checks appear on your credit file as a soft search which other lenders can't see (see Credit Scores for more).

If you're applying for an overdraft facility, which several new players offer or plan to, you'll be subject to a full credit check when you apply for it to see if you're someone it'd lend to, and if you did go into your overdraft, that you've a track history of repaying what you owe. This appears to lenders on your credit file, and many banks automatically do a full credit check when you apply for an account, whether you want an overdraft or not (an exception is Starling Bank below).

Banks will use this credit check, plus data on your application form, to decide whether to accept or reject you. Sign up to our Credit Club to see your free credit report and find out who's checked you, and what sort of search they've done.

Beware giving apps access to your current account – for now

bank statements

Many apps, including the automatic savings apps below, require you to give them 'read-only' access to your online banking on existing accounts, so they can see your current accounts and credit cards to give you insights into your spending habits, calculate how much you can afford to save or aggregate multiple accounts in one place.

This means giving the app your login details so that it can access your data, and here's where there's a grey line.

Some banks' T&Cs say that you're liable for fraud on your account if you've shared your login details with anybody, including apps.

This means that, in the event your account is comprised, you may not be able to claim back money you've lost if you've given an app access to your account – you need to decide whether or not you're happy to take on this risk before you apply.

Here's what major banks told us their current stance is on giving your login details to apps:

However, this won't be an issue for too long, as the Competition and Markets Authority is leading a series of reforms to the banking industry known as 'Open Banking'.

Along with new regulation called the Second Payment Services Directive (PSD2) that comes in on 13 January 2018, these say that banks must give you the option of sharing your data securely with other banks and third parties (like the apps in this guide) if you choose to.

This means that they'll have to let you give access to your info to things like apps and account aggregators – and banks have already started sending out updated T&Cs. For more on this, see Open Banking explained.

Top new current account apps

For the new challenger banks below offering current accounts, you apply through their apps, and the process is quick and easy, typically taking only a couple of minutes. We've listed our top picks below.

These accounts are beatable if you're looking for free cash to switch or high interest, but if you're after snazzy features like budgeting help and instant notifications, read on.

Don't want a full current account? There are also several providers offering prepaid cards, which you load with cash and then use like a debit card. For more info on these, check out our guides on Prepaid Cards, Prepaid Travel Cards and Cards for Under-18s.

Starling Bank

Useful spending notifications, great for budgeting + top for overseas use

Starling Bank*

App-based Starling Bank* offers a full current account that you can open in a couple of minutes. It gives you real-time notifications when you use your debit card plus insights into your spending. As an added boon, there are no fees for spending or cash withdrawals abroad, making it a top pick debit card overseas.

Starling Bank is a new challenger bank, which opened applications to its current account in May 2017 – the first (and so far, only) app-based bank to widely do so. It's regulated by the Financial Conduct Authority, and has the full £85,000 UK savings safety guarantee. For now it has no fees, though it's possible that this'll change in the future.

Key info
  • Minimum monthly pay-in: None
  • In-credit interest: 0.5% AER variable on up to £2,000. 0.25% between £2,000 and £85,000.
  • How to get the app: You can download it for iOS (rated 4/5) and Android (rated 4/5).
  • Member of CASS? Yes
  • Full credit check? Only if you apply for an overdraft.
  • Overseas fees: None
FAQs

What else can the app do? As well as providing spending notifications and insights, the app lets you freeze and unfreeze your debit card at the touch of a button, report it lost or stolen or get a PIN reminder in-app. You can also turn off certain functions of your card like online spending, contactless payments or ATM withdrawals if you want to control a specific type of spending.

Starling has just launched its 'Marketplace', which lets you use other companies' services through the Starling app. There's only a couple of companies featured at the moment, but in the future it'll offer things like ISAs, savings accounts, insurance and mortgages.

Are there limits on using the card? You can make up to three cash withdrawals a day, totalling a maximum of £300.

What exchange rate will I get overseas? The debit card is a Mastercard, so you'll get the Mastercard rate, which you can check here. There are no fees to use your card abroad, making it a top pick for overseas use.

Will Starling credit check me? If you apply for an overdraft, Starling will run a full credit check on you. If you just apply for the account without an overdraft, it'll just run an ID check on you, which won't appear to lenders on your credit report (though you'll be able to see it).

Is my money protected? Yes, Starling Bank has full FSCS protection, so your money saved with it is safe up to £85,000.

Overdraft info
  • Arranged overdraft cost: 15% EAR variable (waived if less than 10p in any month).
  • Unarranged overdraft cost: 15% EAR variable (waived if less than 10p in any month). Max £2/mth
Monzo

Budgeting help & decent for overseas, but you need to join the waiting list to get an account

Monzo*

Monzo Bank* has been one of our top pick prepaid cards since it launched in 2016. Now, it's in the process of rolling out its new current account to all of its users. New customers can't currently open an account but can sign up to the waiting list to get one when they're available to everyone.

Like Starling above, it gives you real-time notifications when you use your debit card plus insights into your spending. It also has no fees for spending overseas, though does charge for overseas ATM withdrawals above £200 in any 30-day period. It's regulated by the Financial Conduct Authority, and the current account has the full £85,000 UK savings safety guarantee.

Key info
  • Minimum monthly pay-in: None
  • In-credit interest: None
  • How to get the app: You can download it for iOS (rated 4/5) and Android (rated 4.2/5).
  • Member of CASS? Not yet
  • Full credit check? Only if you apply for an overdraft.
  • Overseas fees: No spending fees. £200 fee-free overseas ATM wdls/30-day period, 3% after
FAQs

What else can the app do? As well as providing spending notifications and insights, the app lets you freeze and unfreeze your debit card at the touch of a button, report it lost or stolen or get a PIN reminder in-app.

You can also set up 'Pots', which let you assign money in your account to goals like saving for a rainy day, or a specific purchase – you can move money back into your current account whenever you want, but be aware that any money you have in a Pot won't be included in your main account balance.

Are there limits on using the card? You can withdraw up to £400 a day from ATMs, up to a maximum of £5,500/month.

What exchange rate will I get overseas? The debit card is a Mastercard, so you'll get the Mastercard rate, which you can check here.

Will Monzo credit check me? If you apply for an overdraft, Monzo will run a full credit check on you. If you just apply for the account without an overdraft, it'll just run an ID check on you, which won't appear to lenders on your credit report (though you'll be able to see it).

Is my money protected? Yes, Monzo Bank has full FSCS protection, so your money saved with it is safe up to £85,000.

Overdraft info
  • Arranged overdraft cost: £20 buffer then 50p per day
  • Unarranged overdraft cost: £20 buffer then 50p per day (max £15.50/mth)

Top-rated traditional banks' apps

If you'd rather stick with a name you know, but still want a slick app to use, we ran a recent poll asking which banking apps are the best. While Monzo and Starling above came out on top for features and ease of use, the two below were the best-rated big names.

For now, neither of these offer budgeting help or spending notifications (like the other apps in this guide), or cash to switch (like many accounts in our Best Bank Accounts guide), but they're decent options if you want a smooth traditional app experience with a name you know.

  • NatWest – 55% of people in our recent poll say the app's great to use and has lots of features. It offers several current accounts but NatWest's Reward Account is one of our top picks, as for a £2 monthly fee it pays 2% cashback on various bills paid by direct debit.

    The app lets you check your balance and see transactions, as well as set up new payees and make payments. You can download it for iOS (rated 3.5/5), Android (rated 4.6/5) and Windows Phone (rated 4/5).

  • Barclays – 52% say the app's great to use and has lots of features. As well as letting you check your balance, see transactions and manage payees and recurring payments, the Barclays app lets you pay cheques into your account through your phone, temporarily freeze your card and get PIN reminders. You can download it for iOS (rated 4.5/5), Android (rated 4.4/5) and Windows Phone (rated 4.5/5).

    If you've got the Barclays Bank Account (or Premier) you can also apply for the Barclays Blue Rewards scheme. It's an add-on to Barclays current accounts which, for a £3 monthly fee, will pay you at least £7/month back.

Top savings apps

As well as current accounts, there are other new apps that focus on offering savings products, whether it's top rates for locking your cash away, or using tech to automate your savings. It's important to note that some of them are NOT FSCS-protected, but we'll let you know if that's the case. Here are our top picks...

Chip logo

3%+ interest for a year, automatic savings but it's not FSCS-protected

Chip*

Normally the Chip app's*  savings interest starts at 0%, yet use our MSE3 code (10,000 available, new customers only) and you start on 3% AER for a year. Interest is then increased by one percentage point for a year per person you recommend who starts saving through it, up to a max 5%.

It's a savings app that you connect to your current account. It uses an algorithm to work out how much you can afford to save, moving it automatically into a savings account. You can also choose to manually move money into it up to six times a month. Interest accrues weekly, is paid quarterly, and you can withdraw money whenever you want.

The app works with most of the big banks.

They include:

Important: It has an e-money licence, so it DOESN'T have the usual £85,000 per person protection via the Government's Financial Services Compensation Scheme (FSCS) but the real risk is if Barclays went bust, which is where your money is held (see FAQs for more).

It's also worth noting that, until 13 Jan 2018, some banks say you're liable for fraud on your account if you've shared your details with apps like Chip - see our need-to-know above.

Stats box
  • Interest rate: 3% AER fixed for a year with code MSE3, plus one percentage point fixed for a year for each friend you refer (max 5%)
  • Interest paid: Quarterly
  • Max savings: £100/day (up to six manual saves a month)
  • How to get the app: Download for iOS (rated 4.5/5) or Android (rated 4.1/5)
  • Protection: Not FSCS-protected, money is ring-fenced (see FAQs)
FAQs

How does it work? You give Chip 'read-only' access to your current account. It analyses your income and spending then every four to seven days calculates what you can afford to save, and uses a direct debit to move that to a separate 'savings' account, without you noticing. The money normally amounts to about £10-£25 five times monthly; the max is £100 (so £500/mth).

You can also manually move a max £100/day up to six times a month, tell it to save more or less and pause automatic savings.

What if it makes me overdrawn? It'll cover your fees and pay £10 compensation – though you can choose to allow it to take you overdrawn (for example if you had a 0% overdraft).

Is my money safe in Chip savings? Chip isn't a bank, it's an agent of 'e-money provider' Prepaid Financial Services (PFS), which is regulated by the Financial Conduct Authority. Your money is held in a ring-fenced Barclays account. Under e-money regs if Chip or PFS went bust your money remains in Barclays together with any interest already paid to you, though you may end up paying insolvency fees (likely small). 

In the unlikely event Barclays went bust, your money ISN'T protected by the usual £85,000 FSCS savings safety guarantee, so you'd lose it.  

This app currently has no way of making money – the interest comes from its marketing fund. Its aim is to gain market share then offer users other services it profits from in future, such as overdrafts and credit cards. Of course it may change its savings offering in future too. We've done all the checks we can, but you need to accept there are always unknowns with a new concept like this, so you might want to consider how much you keep in there.

Plum logo

Automatic savings and free £5 when you make your first save

Plum*

Plum* works in a similar way to Chip above, in that it automates your savings. It lives in Facebook Messenger, and uses a smart algorithm to work out how much you can afford to save, moving it automatically into a savings account. Apply via our link and keep your account active (don't pause savings) and you'll get a £5 bonus added to your account within 30 days of Plum making your first automatic save.

Plum doesn't pay interest on money saved, but you can choose to invest through it with peer-to-peer lender Ratesetter – see our Peer-To-Peer Lending guide for more information. Plum has an e-money licence, so it DOESN'T have FSCS protection but you'd still be able to recover your money if Plum went bust (see FAQs for more).

Normally, if Plum causes you to go into your overdraft, it'll cover any fees incurred. Like Chip above, it lets you turn on automatic overdraft saving – don't switch this feature on unless you've a 0% overdraft, as it could cost you dear.

Stats box
  • Interest rate: None (3.1% if you invest with Ratesetter)
  • Max savings: £5,000 per save (no max per day)
  • How to get it: Sign up in Facebook Messenger or online
  • Protection: Not FSCS-protected, money is ring-fenced (see FAQs).
FAQs

How does it work? Once you sign up to Plum, you need to connect it to your Facebook Messenger. Then, you link it to your current account, giving it read-only access so it can see your transactions.

It uses its algorithm to analyse your spending and build a 'unique saver profile' for you, and then – through a direct debit – siphons off a few pounds every three to four days into your Plum savings account. You can tell it to save more or less, or pause automatic savings, and you can also move money into your Plum account manually. You can choose to keep money saved in your Plum account, or invest it with peer-to-peer lender Ratesetter.

Which providers does Plum work with? Plum currently works with NatWest, RBS, Santander, HSBC, Lloyds, Barclays, First Direct, Halifax, Citibank, Nationwide, TSB, Bank of Scotland, Co-op Bank, Metro Bank, Clydesdale Bank, Thinkmoney, Yorkshire Bank, M&S Bank, Tesco Bank, Ulster Bank, Citibank, Smile Bank, Danske Bank, First Trust Bank, Bank of Ireland and Post Office Bank.

Is my money protected? Plum deposits your money into a wallet operated by MangoPay, an EU-regulated financial institution. Any money you save with Plum is held in a Barclays instant-access savings account. This means that if Plum were to go bust, you’d be able to recover your money from Barclays.

However, if Barclays were to go under, your money may not be protected by the Financial Services Compensation Scheme, so you could lose your cash – you need to decide if you're happy to take the risk.

It's also important to note the risks involved if you decide to go down the Ratesetter route with Plum – returns aren’t guaranteed, and you could lose your cash – your money’s lent out to individuals, and you’re dependent on them paying it back, though there is a provision fund in place to minimise risks. Ratesetter says no one’s ever lost out, but of course if the economy takes a downturn, it could mean more people defaulting. For more on this, see our Peer-To-Peer Lending guide.

Q&A Digital banking

  • Is internet and mobile banking safe?

  • What about cryptocurrencies such as Bitcoin?

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