Find out what a bank has to do when it is going to reduce the interest rate it pays on your account.
Your bank may be able to change the terms and conditions on your account, including making changes to the interest rate it pays when your account is in credit.
What banks have to tell you about any changes can depend on the type of account you have. If you are not sure which type of account you have you should ask your bank.
Changes to current accounts
If your bank wants to reduce the rate of interest it pays when your current account is in credit it generally has to tell you two months before the change. This also applies to other card-based accounts.
However, a bank does not have to give you this information if the interest rate on your account is linked to an official rate – such as the Bank of England bank rate – and it automatically moves when that rate does. This is sometimes known as a ‘tracker rate’.
Changes to instant-access savings accounts
As with current accounts, if a bank is to reduce the interest rate on an instant-access savings account it generally has to give two months’ notice.
Changes to other savings accounts
To change the interest rate on other savings accounts, such as those with a notice period and cash ISAs, a bank should give you reasonable notice that it intends to make a ‘material reduction’.
A reduction is consider to be ‘material’ if you have £500 or more in your account and the interest rate falls by more than 0.25% at one time or by 0.5% or more over 12 months.
This should give you enough time to move your money to another account, without penalty, if you are not happy with the reduced rate.
Raising the interest rate
If your bank wants to raise the interest rate it pays on your account, it can make the change immediately and does not have to tell you.
If the interest rate on your account is reduced without warning you can complain to your bank. Find out more about how to complain.