LLOYDS TSB, the UK’s biggest current account provider, is looking to grab customers from rival Barclays with an offer of 2 percentage points more interest on credit balances.

From tomorrow, it will increase the rate on its Plus account to 6% on balances of up to £2,500. The account is free and requires monthly funding of £1,000. There is a charge of £17 a month if you want cheaper overdraft rates and motor, travel and mobile-phone insurance. New customers automatically receive 6% on balances, reverting to 4% after one year.

Existing customers, who already earn 4%, will need to telephone the bank to request the higher rate, which is available for a year.

The deal does not apply to the vast majority of Lloyds TSB customers who have the bank’s standard Classic account and earn just 0.1% on credit balances.

The offer from Lloyds, which has more than 12m current account customers, contrasts with Barclays, which came under fire last week for stripping fee-free accounts of credit interest and raising the rate on authorised overdrafts to 17.9% for all but the most expensive accounts. Customers can get 3% interest for a fee of £3 a month.

Lloyds said: “The overwhelming evidence is that customers like to receive interest on credit balances.” Halifax last week launched a “regular saver” account paying 10% for one year, and unlike other high-interest savings accounts, you do not need to open a current account to qualify. You must make monthly deposits of £25-£500 and no withdrawals are allowed, otherwise the rate drops to 4.36%. The rate goes up to 12% for those who keep at least £5,000 in a nominated Halifax savings account.

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