First-e, Europe's first Internet-only bank, officially goes live this week, saying it will pass along the lower costs it achieves by operating online.
The bank offers a savings account that pays interest, before tax, of 5.9 percent, no matter what size the balance. The rate beats every other bank and building society on a low balance, First-e claims.
Only savings accounts are on offer for now, but a share-dealing facility and current account will be available by the end of the year, the company says. It plans an independent mortgage andinvestment advice service for next year. The current account will pay an interest rate "comparable to a savings account" when the customer is in credit, while the overdraft rate will be about eight percent, the company said.
Most banks pay less than one percent interest while the customer is in credit, but charge 13 percent or more for an authorised overdraft.
First-e is a joint venture between a private French bank, Banque d'Escompte, and Enba, a UK-based venture capital firm whose shareholders include chip giant Intel.
In August the company opened its virtual doors a month ahead of schedule to give Web users a chance to register and open savings accounts before the official launch.
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