A&L current account pays 6.1%

By SASCHA HUTCHINSON
Updated: 07:25 EST, 21 September 2006

ALLIANCE and Leicester has raised the rate on its high-interest Premier Direct current account, but has removed the opportunity for these customers to also earn a market-leading savings rate.

The restructure of the portfolio of Premier accounts means that while Premier Direct current account customers will earn a best-buy rate of 6.1%, they are far better off searching for a savings account with another bank.

The Premier range has two current accounts – the Premier current account paying 1.5% and the Premier Direct current account which raises its rate from 5% to 6.1% today – as well as the Premier Regular Saver, which has raised its rate from 10% to 12%.

New customers will now no longer be able to open both the Premier Direct account and the Premier Direct Saver. Instead, Premier Direct customers will be offered only the low-rate Plus Saver account which pays 4.3% - well below the Bank of England base rate of 4.75%.

The Premier Direct current account offers a very tempting 0% rate for both authorised and unauthorised overdrafts, although it does charge a fee of £25 for slipping into unauthorised overdraft. After 12 months the rate slips back to a competitive 5.9%.

The Premier current account also offers a 0% overdraft, which becomes 7.9% after 12 months, as well as free European travel insurance. It also charges a £25 unauthorised overdraft fee, but only these customers will now be able to open the 12% savings account. Both current accounts must be funded by at least £500 a month.

But while the Premier Direct Saver appears to offer the best savings rate on the market at 12%, in reality the account is encumbered with conditions. Savers must nominate an amount of no more than £250 that will be transferred from their current account each month for a year. If a payment is missed or the amount is altered, or a withdrawal is made, the account is closed.

Earlier this week, Yorkshire Building Society launched a new savings account paying 6.5%. Although it is not one of the highest 'headline' rates on the market, its flexibility and ease of use will make it more attractive to some savers than other accounts that claim to offer a higher rate of return.

Abbey has a linked savings account paying 7% for 12 months, but if any monthly payments are missed, or any withdrawals are made, you will earn at paltry 0.75% for that month. Halifax also offers a 7% account but if one monthly payment is missed, your account is closed.

Barclays has a linked savings account paying 10%. It offers more flexibility than the A&L account, because customers are required only to transfer between £25 and £250 each month, but it is linked to a miserly 0.1% current account. Your current account must be funded by at least £1,000 a month.

Customers of A&L's Premier Direct current account would be better off opening an online savings account elsewhere, which will at least pay them the base rate of 4.75%.

Or, they could switch their current account to the Premier current account and link it to the Premier Regular Saver – if they can keep up with the conditions imposed by A&L.