Challenger bank, Tandem, is set to offer a new market-beating savings account paying 1.5 per cent – but there’s a catch – a £5.99-per-month membership fee.
Membership does come with another perk however, a credit card charging 0 per cent interest indefinitely, that also pays 0.5 per cent cashback and offers fee-free use abroad.
It’s a case of like it or lump it for existing customers however, as the new offering replaces its existing popular cashback credit card.
They have been given the option to upgrade or stop being able to use their card from 9 March.
Tandem: The challenger bank offers budgeting tools via its mobile app and credit cards
Customers of the app-only bank have been told that after this date they will need to repay all outstanding amounts, interest and fees if they choose not to pay for membership.
The existing cashback credit card is very similar to the new offering. It offers 0.5 per cent cashback on all spending plus no overseas fees on spending and cash withdrawals. This made it a popular option for those wanting to bypass the typical 3 per cent fees charged on transactions.
While it was withdrawn from the shelves last year, existing customers continued to enjoy the benefits of the cashback card up until now.
It came with an APR of between 18.9 and 29.9 per cent attached depending on your credit score.
The new offering charges no interest at all on an ongoing basis, but still offers the same overseas and cashback perks.
It will be trialled on existing members who upgrade before it’s launched to new customers.
So is it worth signing up?
It’s a tricky question to answer, Tandem’s new membership is a unique offering so it is best to break it down and compare its components.
A market-beating savings rate
First off – the next best easy access savings deal sits at 1.35 per cent, a rate available from both Saga and Goldman Sachs’ Marcus.
Yorkshire BS does offer an instant access account paying 1.4 per cent, however it allows withdrawals on only one day per year.
Easy access rates have been drifting down in recent months and it has been a while since a widely available 1.5 per cent rate has been seen in the best-buy tables.
However, savers would need to be squirrelling away around £50,000 before they saw the benefit of paying the £72 in annual fees for the Tandem account compared to the top comparable easy access deals that don’t charge a fee.
What about the credit card?
When it comes to the new credit card offering it’s more tricky to compare as it depends what you are using the card for.
While it’s nice to have all of the perks Tandem is offering combined in one card, you can easily save yourself the cash and open a fee-free bank or credit card that will give you free spending abroad or that pays cashback, according to Andrew Hagger of Moneycomms.
He says: ‘The free FX abroad is a nice benefit – but how many times a year would you use it?
App-only banking: Of course the membership won’t appeal to those who are not willing to bank on their mobile
‘I’m not sure which retailers are eligible for the 0.5 per cent cashback, but it would take a £1,200 monthly spend just to cover the account fee.
‘The Santander all in one credit card offers 26 months at 0 per cent on purchases plus 0.5 per cent cashback for a monthly fee of just £3 or the Amex everyday platinum cashback card – no fee but pays 0.5 per cent on first £5,000 spend per year and 1 per cent after that.
‘It’s a strange combination of offers mixing savings and borrowing within the same package – I’m not convinced that it will be a winner with savvy consumers.’
Let’s take the cashback offering first.
As Hagger suggests it certainly isn’t worth signing up just for the benefit of money back on spending, particularly if you are regimented about clearing your balance each month.
The American Express Everyday Platinum Cashback Credit Card pays 0.5 per cent on the first £5,000 and 1 per cent after that.
On a £1,200 month spend that’s £119 in cashback, with no annual fees, compared to just breaking even with the Tandem card.
What about the interest-free spending then?
The idea of borrowing with no interest charged, indefinitely, is an interesting one.
According to Tandem, customers need only continue making at least their monthly minimum payment to qualify and should Tandem change this, customers would get at least 60 days notice in line with their credit agreement.
Even accounting for the monthly fee, borrowing would be pretty cheap, costing around 2.4 per cent interest on the average balance of £3,000.
Even better, on the maximum limit of £12,000, a £72 annual fee is equivalent to interest at 0.06 per cent on your borrowing.
However, there are a whole heap of credit cards offering around two years or more with interest free purchases.
The best buy deal from MBNA for example offers 26 months 0 per cent balance transfers and purchases, followed by Barclaycard at 25 and Tesco Bank at 24 months.
You can read more about the best credit cards for cashback and free spending in our complete round-up guide.
What about fee-free spending abroad?
Swipe your credit card abroad in a shop or withdraw money from an ATM and you will usually pay around 2 to 3 per cent in transaction fees unless you have a specialist card.
As Hagger suggests, a specialist fee-free card may not come in handy that often, but for those travelling frequently or who want to avoid the fees, there are a heap of good options.
We go into these in more depth in our dedicated guide, but Starling’s current account and Halifax’s Clarity credit card offer fee-free spending and withdrawals abroad with no annual fees.
This is Money’s verdict
Our verdict? For the savvy it’s not worth doing. You’d have to take advantage of all four of the main benefits – the savings rate, the cashback on credit card spends, the fee-free spending abroad and the 0 per cent interest deal – for the benefits to earn the fee.
But, factoring in the fee, the deal is probably the most worth it for those borrowing a hefty sum on their credit card who want to avoid a disappearing 0 per cent interest deal.
However, while packaged up nicely and an interesting offering, you can get everything on offer without an annual fee by opting for separate accounts.
THIS IS MONEY’S FIVE OF THE BEST CREDIT CARDS
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