Starling Bank has announced that from 1st October, it will increase its in-credit current account interest rate to 3.25%.

The new rate is payable on balances up to £5,000 for sole accounts and £10,000 for joint accounts.

John Mountain, interim CEO of Starling Bank said: “Most banks with competitive interest rates require customers to move money into a separate account or pay a subscription fee. This friction means that many people won’t get around to taking action and so miss out on the interest on their main balance. We wanted to change this and ensure that everybody benefits by paying interest on the first £5,000 in their current account. This is something that all big banks should consider doing.”

It’s big change from Starling, which until now was paying just 0.05% on balances up to £85,000 so their customers will no doubt be delighted to see this shift change.

Interest rates apply to the first £5,000 in a customer’s account, inclusive of money held in Spaces and children’s Kite cards connected to an adult account.

Customers with joint accounts will earn interest on joint balances of up to £5,000, as well as on balances of up to £5,000 in their personal current account. 

According to Starling, most of its retail customers will benefit from the interest on the entirety of their current account balance, with 94% holding £5,000 or less.

Interest is paid monthly on the first day of the following month.

The 3.25% interest rate is available to new and existing customers.