MBNA unveils first ever savings product offering 5% return on cash - is it any good?

Credit card provider MBNA has entered the savings market with a one-year fixed account. How does the rate compare to other deals on the market?

Putting a coin in a white piggy bank at home
(Image credit: Guido Mieth)

Lloyds Bank owned MBNA has stepped foot in the savings space for the first time today (16 February) with the launch of a one-year fixed-term account.

MBNA, traditionally known for its credit card offering was acquired by Lloyds in 2016, and will offer savings for the first time, offering a competitive 5% AER on its one-year fixed saver

Darren Tong, savings director at MBNA, said this is the first time MBNA has launched a savings product.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Find out how the MBNA fixed saver works, who can get it and how it compares to the rest of the savings market. 

How does the MBNA savings account work? 

The MBNA fixed savings account is offering 5% AER for one year, which means you will earn 5% interest on your cash for 12 months and the rate won’t change in this period. 

Although the saver can be opened with just £1, you will need to deposit a minimum of £1,000 by transferring money from a UK current account, to earn the 5% rate. 

Any money should be paid into the saver within 14 days of opening the account. After this, you will not be able to pay in more funds. 

Withdrawals are also not permitted for one year and once opened, you won’t be able to close your account in the middle of the term. 

You will gain access to your savings once your account matures, which is also when gross interest earned will be paid into your account. Before the one-year ends, MBNA will notify you of this. 

The saver holds up to £750,000 in funds, but only £85,000 will be protected by the Financial Services Compensation Scheme (FSCS) should the bank go bust. 

Am I eligible for the MBNA savings account? 

To open the MBNA one-year fixed saver, you must fit the following criteria: 

  • Be aged 18 years or over
  • Be a UK resident 
  • You hold a UK current account 

The account can be opened online and managed over the phone. 

How does it compare to the rest of the savings market? 

MBNA has already made its mark in the savings market, offering a handsome 5% AER. Whilst it doesn’t fit on our best-buy table, the rate still remains competitive and is only 0.25% less than the base rate. 

Currently, you can earn up to 5.21% AER on the top one-year fixed savings account, by SmartSave

It comes as the savings market as a whole has seen rates falling for the past couple of months as the Bank of England has frozen the base rate for the fourth time at 5.25%. 

MoneyWeek has been tracking the best savings accounts and has seen the following movement between the third interest freeze on 14 December and the latest halt on 31 January: 

  • 40 one-year fixed savings deals dropped their rates. Nine products fell below 5% and one deal plummeted to the 3% region. 
  • Six providers pulled their one-year fixed deals.

That said, it seems after the latest base rate pause on 31 January, competition is starting to bump up among one-year fixed accounts as four providers upped their rates:  

  • Hodge Bank increased its rate from 5% to 5.11% on 8 February and then upped it further to 5.16% on 15 February. 
  • Shawbrook Bank upped its rate from 5.12% to 5.16% on 9 February.
  • SmartSave went from 5.18% to 5.21% on 12 February.
  • Allica Bank increased its rate from 5.15% to 5.2% on 12 February. 

Whilst this is good news, savers should still know that these attractive rates don’t stick around for long. 

If you’re someone who prefers flexibility with their savings, you can currently earn up to 5.2% AER on an easy-access savings account. This will give you freedom with withdrawals and access to your cash without hefty fees. 

Though, it’s important to read the small print on easy-access accounts as many competitive rates impose restrictions on savers, such as a limit on the number of withdrawals. 

And don’t forget, the rate on an easy-access saver is variable, so it could change at anytime. 

Vaishali Varu
Staff Writer

Vaishali has a background in personal finance and a passion for helping people manage their finances. As a staff writer for MoneyWeek, Vaishali covers the latest news, trends and insights on property, savings and ISAs.

She also has bylines for the U.S. personal finance site Kiplinger.com and Ideal Home, GoodTo, inews, The Week and the Leicester Mercury

Before joining MoneyWeek, Vaishali worked in marketing and copywriting for small businesses. Away from her desk, Vaishali likes to travel, socialise and cook homely favourites