Nationwide is cutting the interest rates on its current accounts for customers who pay in less than £1,500 a month – fuelling concern that providers are creating a “second class banking system.”

Britain’s biggest building society, like other major providers, will now only pay its best interest rates to its most profitable customers. From August 1, Flexaccount holders who pay between £500 - £1,500 into their account per month will see their interest rates slashed from 3.5 per cent to 2 per cent, whilst those who pay in less than £500 will receive just 0.10 per cent. Only customers who pay in more than £1,500 a month will receive the maximum rate of 3.5 per cent.

Esther James at comparison service Moneyfacts.co.uk said: “All the best current accounts now either charge a monthly fee, or require a large minimum monthly deposit. Unfortunately the many people who can not afford to pay in £1,500 per month are left with the worse deals.

“The credit crunch means banks are still desperate to bring in deposits, so they are ramping up incentives to retain their most profitable customers whilst doing nothing to keep those with lower earnings.”

All six of the Moneyfacts “best buy” current accounts require a minimum monthly deposit of £500 to £1,500. Alliance & Leicester pay 8.19 per cent if £500 or more is paid in per month, whilst Abbey pays 7.72 per cent for the first 12 months if the account has more than £1,000 per month. Lloyds account, which pays 5.94 per cent, also requires £1,000 per month.

Nationwide, which has 4.4 million current account customers, made the announcement just weeks after Barclays said that it will stop paying any credit interest on standard current accounts. Only customers with a fee-paying account will benefit from an interest rate from next month.

Kevin Mountford at comparison service Moneysupermarket.com said: “As the bank charges test case rumbles on, we have long been predicting that providers will tighten profit margins on current accounts. Nationwide, like other providers, is penalising its least profitable customers to claw back some income.”

Ms. James added: “If you do pay more than £1,000 per month into your current account, there are some great deals at the moment and you should consider switching if you are not happy with your current rate. But everyone else, it seems, will have to make do with second class accounts and rates.”