The brand new current account that gets you 7.1% interest on your savings

A popular online bank has launched its first current account, offering customers a leading 7.1 per cent interest rate on its linked savings pot.

Zopa Bank's new 'Biscuit' account also offers two per cent AER interest on cash balances, with no limit on how much they can earn. The rate is fixed for 12 months and will then become variable.

Customers can also earn two per cent in cashback on bills paid by direct debit, up to £1,500 per year or £125 per month, with the rate guaranteed for 12 months.

Zopa, which has 1.5million customers in the UK and received its full banking licence in 2020, has so far only offered savings and credit accounts.

The linked savings account will pay a 7.1 per cent rate on deposits of up to £300 per month.

This would earn someone paying in the maximum amount each month £137 in interest over the year, if the rate stays the same. Interest on the pot is calculated daily and added each month.

Zopa's new current account comes just a month after LHV Bank launched the first new current account in the UK since December 2022.

The most recent major banking player to launch a UK current account was JP Morgan's Chase back in 2021.

Zopa's chief executive Jaidev Janardana said: 'Stepping into everyday banking is a natural next step in Zopa's mission to build the home of money for its customers.

'We believe that British consumers deserve better than having to constantly chase deals and accept complexity or poor experience.

'All our products are designed to provide good value and ease, and our new bank account is another great example of this philosophy.'

Zopa said its current account will allow accounts with other banks to be linked to its app, so that users can manage their money and make payments from one place.

Merve Ferrero, chief strategy officer at Zopa, said: 'Many of us spread our money across different providers - holding it with high street banks, moving some into savings or investments, and spending through neo-banks.

'We do this because we want safety, good value, and convenience at no extra cost. But no single bank meets all these needs in one place.

'Zopa Bank aims to change that with Biscuit - delivering great value across everyday spending and saving, all through one seamless app experience.'

The account also comes with zero fees on overseas spending, and £200 can be withdrawn abroad over any 30-day period without incurring any charges.

Above £200, a two per cent fee will be charged.

Accounts can be opened online, with account holders receiving a virtual card instantly.

The firm said its current account also gives users instant access to its Smart Saver savings account, which offers 3.5 per cent AER on instant-access savings and up to 4.25 per cent AER for its fixed pots, with the top rate offered on one-year fixes.

The instant access rate is not a market leader, as the best-buy easy-access savings accounts are currently paying up to 5 per cent.

One-year fixes elsewhere pay up to 4.55 per cent.

Zopa is regulated by the Financial Conduct Authority, and accounts are FSCS protected, giving users deposit protection up to £85,000 if the bank fails.

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One of the main draws of Biscuit is the two per cent interest it offers on account balances. It is one of just a few banks to do so.

The best rate is offered by Nationwide's FlexDirect current account at five per cent, however this is limited to just the first £1,500 deposited over a year.

Digital bank LHV pays 3.25 per cent on balances up to £1million, while Kroo pays 3.15 per cent up to £500,000.

Santander's Edge Up account pays 2.5 per cent, but costs £5 per month, while TSB's Spend & Save pays 2.05 per cent on a fee-free basis.

As a fee free account, Zopa's rate puts it fairly in the middle of the pack, with Club Lloyds, Virgin Money and Bank of Scotland all paying less interest on account balances. Of course, many current accounts don't pay any.

Zopa's 7.1 per cent savings rate for its regular saver, however, is a market leader.

It puts the online bank in clear competition with First Direct, which offers seven per cent on savings up to £300 per month. First Direct's interest is paid after 12 months.

When it comes to cashback, Zopa's two per cent on bills is generous. In fact, it is the best rate currently available, with Nationwide, Santander Edge Up and Chase each offering a one per cent cashback rate.

Zopa only offers cashback on bills paid by direct debit, however - meaning customers could get a better deal elsewhere, depending on how they usually spend their cash.

Chase will pay cashback on groceries, transport and fuel up to £15 per month, Nationwide's FlexDirect pays on all debit card purchases for 12 months up to £5 per month, and Santander Edge Up pays up to £15 per month on some household bill direct debits.

Another thing potential customers may want to consider is that Zopa does not have any branches.

Alongside an online chat function, Zopa customers do have access to a customer service phone line, open between 8am and 8pm Monday to Friday, and on weekends between 9am and 5:30pm.