The Nationwide bank account that puts branches off limits

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Nationwide has launched a self-service current account paying more interest than most High Street savings accounts.

The new FlexDirect account pays customers 1.6 per cent after tax (2 per cent before) on balances up to £2,500 — a rate well above the average 0.74 per cent (0.92 per cent) payable on easy access deals.

However, it has been dubbed a self-service account because you won’t be able to do any of your everyday banking at counters in branches.

Self-service: The FlexDirect account is not branch-based

Instead, customers will have to use the internet or the telephone. To pay in cheques and cash, they will be able to use the machines inside branches.

While there is no monthly fee, you’ll need to put in at least £1,000 a month to qualify. For most people, once tax is deducted, this means earning a salary of at least £14,000. Those aged over 65 would need a pension income of more than £12,500.

Customers get a fee-free overdraft for three months, but after this have to pay £1 a day if they want an agreed borrowing limit. Charges are capped at £20 a month. Unauthorised overdrafts are £5 a day.

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Interest is paid at 1.6 per cent (2 per cent) up to £2,500, and 0.8 per cent (1 per cent) on anything above this for one year. After this, the rate falls to 0.8 per cent (1 per cent) on all credit balances.

At the moment Nationwide offers only one current account, called the FlexAccount. It has free travel cover and allows everyone to use branches for even the most simple transactions.

FlexDirect is aimed at better-off customers who keep a healthy balance in their accounts.

A spokesman for Nationwide says: ‘Offering 2 per cent interest on credit is a way for us to reward those who don’t use a branch.

‘However, if there are emergencies, such as a lost or stolen debit card, you will still be able to pop into the branch to sort it out.’

Britain’s biggest building society hopes its new offering will tap in to its reputation for delivering good customer service. While customers won’t be allowed to complete everyday transactions at counters, they will be able to visit branches for advice on financial matters.

New deal: FlexDirect looks good on paper - but First Direct, Halifax and Santander are also offering top deals

And they will have full access to all other Nationwide services. The society’s rivals include First Direct, Halifax and Lloyds.

Of these, First Direct 1st account is usually considered the best for service. It doesn’t pay interest on balances, but does have a regular savings account paying 6.4 per cent (8 per cent).

You’ll need a salary of at least £22,800 to qualify, or have a First Direct product such as a mortgage, or pay a £10-a-month fee.

New customers currently get a £100 bonus if they switch. Its overdraft is fee-free up to £250, but interest is then charged at 15.9 per cent.

Alternatively, the Halifax Reward account pays £5 a month as long as you pay in £1,000 a month. However, its overdraft fees can hit you hard.

The bank charges £1 a day for agreed borrowing up to £2,000, then £2 daily up to £3,000, and then £3 a day above this.

Lloyds Classic Account with Vantage offers between 0.8 per cent (1 per cent) and 2.4 per cent (3 per cent) interest, as long as you have at least £1,000 in your account, and are no more than £5,000 in credit. But complex overdraft charges, including a £6 monthly fee and 19.94 per cent annual interest, make it expensive if you go into the red.

Meanwhile, NatWest has halved the number of perks on its main packaged current account but increased the cost by £36 a year.

The popular £12.95-a-month Advantage Gold account has been closed to new customers and replaced with the Select Platinum account at £16 a month. Yet despite the higher fee, the new account has only six benefits, compared with 11 before.

Natwest has admitted the value of these extras, which were £864 a year, are worth just £622. As a result, after fees, new customers will be £278 a year worse off.

Natwest says it has improved the insurance cover by ridding the Select Platinum of the sneakiest small print on the Advantage Gold. For example, Advantage Gold customers are given just 48 hours to make a mobile phone insurance claim after their handset is stolen. Select Platinum customers will have ten days.

Similarly, the car breakdown cover on the Advantage Gold only covers vehicle towing for ‘up to ten miles’. There is no such limit on the Select Platinum account.

It also offers worldwide travel insurance and discounts on National Trust visits, restaurant meals and travel money.

Natwest says: ‘Offering a smaller set of higher quality benefits allows us to focus on the benefits which customers value most, at the highest specifications possible.’