Zopa launches current account with cashback and 7.1% on savings
The battle for bank customers intensified this week, with a new player entering the UK current account market and offering cashback on bills and access to a savings account paying 7.1%.
Digital bank Zopa is hoping the perks – which also include in-credit interest and fee-free spending abroad – will tempt switchers to its first day-to-day account.
The company has been around since 2005, when it launched as a 'peer-to-peer' lending platform, linking savers seeking better returns with individuals looking for loans.
It later shut down the peer-to-peer operation – and is now a fully fledged digital bank.
Zopa's free-to-open current account is called Biscuit – a name that allows it to make puns about how you can 'watch your dough rise'. You have to open it in the Zopa app, which takes minutes, says the company.
The account has no monthly fee and comes with a contactless Visa debit card. Zopa points out that, unlike many other fintech companies, it holds a full UK banking licence, with deposits protected up to £85,000 by the Financial Services Compensation Scheme.
While Biscuit may not be right for everyone, it has some decent features including no overseas card spending fees, and 2% AER (1.98% gross) interest on current account balances, with no limit on what you can earn. The rate is fixed for 12 months and variable after that.
It will pay 2% cashback a month on any direct debits paid from the account, up to a maximum direct debit value of £1,500 a year, with this rate guaranteed for 12 months.
The digital bank also offers access to a regular saver account, paying 7.1% AER (6.87% gross), into which you can pay in up to £300 a month. Assuming this rate stays the same for the next 12 months, you could earn up to £137 a year.
You can get in touch with the bank via in-app chat or over the phone, and it says customers can link external accounts to manage their money and make payments from one place.
There are downsides, though. Zopa is for people who are happy to use an app-based account. If you need branch access, look elsewhere. Also, you cannot pay cash or cheques into the account.
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It does not currently offer an arranged overdraft and is not compatible with the banking industry's current account switching service, which aims to make switching your current account from one bank to another simple and stress-free.
Andrew Hagger, a personal finance expert and founder of the website MoneyComms says: 'On the face of it, this looks like a good deal … It's always good to have some fresh competition in the banking market.'
Hagger says other challenger banks such as Starling offered in-credit interest, only for it to be later withdrawn. 'Hopefully this won't end up being axed after the initial 12-month fixed rate offer,' he adds.
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