A British bank is charging savers negative interest rates
Starling has become the first British bank to introduce negative interest rates for personal account customers, though only those who hold high balances in euros will be affected.
Rather than charging a membership or account fee, the challenger bank will levy a monthly rate of - 0.5% on balances of more than €50,000 held in its euro accounts. The account allows customers to hold, receive, send and spend euros and is aimed at international customers who are often paid in the currency.
Someone who held €51,000 in their account for a whole year would therefore be charged a negative rate on the €1,000 over the €50,000 threshold, which would amount to around €5.
The sub-zero rate, which will come into effect on 4 November, is one of a series of updates sent to Starling's 1.25 million personal banking customers last weekend.
It comes a week after fellow smartphone challenger bank Monzo announced it would begin charging customers a 3% fee if they withdrew more than £250 a month from cash machines after the end of October, unless they use Monzo as their main current account.
Starling said that fewer than 1% of accountholders would incur the new negative rate and that the change was down to the European Central Bank having charged banks 0.5% to hold their deposits with it since September 2019.
It has had a policy of negative interest rates since 2014 but cut rates from -0.4% to -0.5% last year. Asked why the change was announced now, a year on from that decision, a spokesman from Starling said they had wanted to see how customers used the account, launched in February 2019, first. He said: “The ECB has had an interest rate of -0.5% since September 2019. This means that when customers hold euros with us, it costs us.”
“We've decided to pass on this negative interest rate, only for large deposits over €50,000, so that customers can continue to use their account for euro transactions and benefit from our low exchange rate fees.”