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.

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.