TSB has launched a new bank account that will automatically top up with savings to stop you going into your overdraft.
Customers can put cash aside into a savings pot with the new Spend and Save current account which can be used to top up your main account if it dips below a certain threshold.
Account holders can set the minimum balance limit, for example at £20, and then TSB will automatically take money from your linked savings pot if you sink below it.
It’s the first current account to offer this “auto balancer” service, which will help stop you from going in the red if you’re hit with an unexpected bill.
It comes four months after major high street banks hiked arranged and unarranged overdraft fees to up to 49.9%.
The rate rise was in response to a ban on charging customers rip-off unarranged overdraft fees by the watchdog, although they can still charge interest.
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TSB charges customers 39.9% if they go into their overdraft.
Of course, the top up service only works if you have enough money in your Savings Pot in the first place, otherwise the extra funds won’t be transferred and you may still sink into your overdraft.
TSB is following in the steps of Monzo and Starling and offering a “save the pennies” feature too to help you build up a small nest egg for a rainy day.
When you use your debit card to spend, TSB will automatically round up it to the near £1 and put the difference into a Savings Pot or a separate TSB savings account.
For example, if you bought something that cost £5.59, it would tuck 41p into savings.
While it does’t sound like much, it can add up in the long run.
Customers can also earn £5 cashback every month when they make 30 payments using their debit card but only for the first six months of opening an account.
While this sounds like a great perk, it’s not worth overspending to be eligible for the cashback.
Customers can actually earn more cashback with Barclays Blue Rewards account, which pays £7 a month, although it costs £4 a month to open an account.
You can get the same amount of cashback with a free current account from The Co-Operative Bank, which offers shoppers £5 cashback when they set up four monthly direct debits.
TSB hasn’t specified if there will be a fee to open an account or whether it will pay interest on Savings Pots but we’ve asked and will update this piece when they get back to us.
“In these unsettled and uncertain times, it is really positive to see a new current account which will encourage savings behaviour, especially when the low interest rate environment may have left some disincentivised to put money aside for future emergencies,” Eleanor Williams from Moneyfacts.co.uk told The Sun.
“As with any financial commitment, those customers considering any new current account should carefully check the full terms and conditions, and take into account any associated costs, fees and rates to ensure that they select the best option for their circumstances.
“Reviewing the account after six months when the cashback offer ends would also be wise.”
TSB also boasts that Spend and Save customers can opt to set up text alerts to let them know what their balance is and to warn them if they’re in danger of going overdrawn.
While it’s useful to receive updates on your account, banks are actually required by regulation to text you when you’re close to going into your overdraft.
Existing TSB customers can already open an account, while new customers will have to wait a few more weeks before its available to them.
Pella Frost, head of personal current accounts at the bank said: “Spend and Save has been designed to help our customers have more control of their money.
“We know that now, more than ever, our customers want us to make it easier for them to manage their money, so the variety of features available should help them feel more money confident.”
