Last week, the Bank of England raised the UK’s base rate for the tenth consecutive time to four percent which has been passed on by high street banks and building societies. However, with inflation at 10.5 percent, savings providers are still unable to provide decent returns for accounts holders. Kroo Bank is giving its customers a 3.03 percent AER interest on their current account balance for balances of up to £85,000.
Speaking exclusively to Express.co.uk, Kroo Bank’s CEO Andrea de Gottardo shared the plight facing many savers during this moment in time.
He explained: “From a savings perspective, if there is at least one positive thing about the current environment is that interest rates are going up. They are at one of the highest levels we have recently seen.
“Clearly, they (savers) need to be really mindful of where they put their money, shop around for the best rate.
“Probably not getting into any kind of long term fixed rate because in this environment when the rates keep moving up, it is better probably to have something which is instant access so that you can get the most out of the money.”
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However, Mr de Gottardo noted the danger posed by inflation on Britons’ ability to save successfully.
The bank’s CEO added: “If you look at the level of inflation, and if you look at how much the interest rate has increased, the inflation is still much higher than the interest that savers can receive on their account.
“Effectively, to some degree, they’re still losing some value to their money, so that’s why I like being really careful with your finances, knowing how to manage your money, how to manage your expenses, and your outgoings is more important now than ever.”
Despite this, there are options available to those who are looking to avoid the detrimental impact of inflation on savings.
Notably, Kroo’s current account offering is a way people can still get a 3.03 percent boost despite not being a traditional savings account, according to Mr deo Gottardo.
The savings expert provided a hypothetical scenario for those looking to see how the bank’s current account deal works.
If someone has a net salary £1,600 per month, with £0 in their current account and no other savings at the end of the month, a traditional easy-saver account would not help those looking to save.
However, Kroo Bank’s offering will earn customers a 3.03 percent AER/2.99 percent gross rate on all credit balances.
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As a result, customers will not need to have a separate savings account to boost their finances because the financial institution will do it for people.
Customers earn interest on the average drawdown they place into the current account, which in the case of the £1,600 scenario would be £800.
A 3.03 percent interest rate applied to £800 would be the equivalent of £24.24 per year, which is £2.02 per month.
Mr de Gottardo shared why this would be welcome relief for those struggling to save amid the cost of living crisis.
The expert said: “This is where I actually hope we can really help because what we are doing is paying a top table interest on any credit balance in your current account. We’re moving away from the concept of savings.
“You don’t have to keep worrying and thinking about, ‘I read everywhere I should be saving but I don’t think I have enough money’.
“It removes all the headache around that. It doesn’t matter whether you will end up at the end of the month with £10, £100 or £200.
“What matters is every single bit of money you have in your account will have interest. That’s exactly what banks should do.”