Zopa, the UK-based digital bank, has launched a competitive regular savings account with a bumper 7.10% interest rate.

Regular savings accounts are designed for people who want to save a fixed amount each month over a set term, typically 12 months, and earn a higher interest rate than standard savings accounts in return. Savers can deposit up to £300 per month, allowing a maximum total deposit of £3,600 over a 12-month period. Interest is paid at the end of the term, with a full £3,600 deposit expected to earn around £255.60, bringing the total balance to approximately £3,855.60.

There is no minimum deposit to open Zopa’s Regular Saver pot; however, you need a Zopa bank account and a Smart Saver first, which requires a minimum deposit of £1.

After 12 months, the regular saver converts to an easy access account with a 3.5% rate, but Zopa said customers can open a new regular saver to continue earning the higher rate.

Unlike many regular savings accounts, savers are allowed to withdraw money at any time without penalty. However, they’ll only be able to replace the money within the monthly allowance of £300. For example, if you withdraw £500 but want to put money back in, you can only deposit up to £300.

To open the account, you must be aged 18 or over, be a UK resident and have tax residency in the UK, and have a Zopa bank account and Smart Saver account.

The product has been launched alongside Zopa’s new current account, ‘Biscuit’, which allows customers to earn up to £256 a year through a combination of cashback and interest.

The account pays 2% annual interest on all balances and offers 2% cashback on household bills paid by direct debit, capped at £1,500 of direct debits per year. This account also gives customers access to the 7.10% AER regular savings account.

What else is out there?

Principality Building Society is still topping the table for regular savers with an Annual Equivalent Rate (AER) of 7.5%. The account runs for six months, and interest is paid on maturity.

Savers can invest up to £200 per month, which means the pot can grow to a total of £1,200, and withdrawals are not permitted until the account matures.

With a maximum monthly investment of £200, savers will end up with £1,227.53, including £27.53 in interest. So, while it may have a market-leading AER, its six-month term limits the total interest earned.

First Direct offers a competitive 7% AER over 12 months. The account allows a higher monthly deposit of £300, which totals up to £3,600 in savings over the course of a year.

At the end of the term, savers will have £3,736.50, including £136.50 in interest. Although First Direct’s interest rate is lower, the longer term and higher deposit limit make it a potentially better option for amassing larger savings.

Other providers offering competitive interest rates on regular accounts include The Co-Operative Bank with a 7% AER, Nationwide Building Society with a 6.5% AER, and Lloyds Bank with a 6.25% AER on its Club Lloyds account.