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Revolut has launched a boosted 5 per cent variable interest rate on its instant access savings account for new customers.

The digital challenger bank is paying the bonus rate on balances up to £25,000 until 4 December. Anything above this reverts to the regular underlying rate that applies to the plan you’re on.

If you join the free standard plan your interest rate will be just 2.9 per cent, which makes your rate over the whole year 3.95 per cent.

We’ve worked this out by calculating an average rate taking six months at 5 per cent and six months at 2.9 per cent.

In March this year Revolut finally became a full UK bank, five years after it first applied for the licence.

The boosted rate is attractive but you should compare all your options before going ahead. Secure Trust Bank offers 4.21 per cent variable on its easy-access account, beating the average 12-month rate for standard Revolut customers.

Revolut’s savings account works like most others. After signing up, you can open an account within the app. 

There's no minimum deposit needed to get started and your savings are protected under the Financial Services Compensation Scheme (FSCS) for up to £120,000. 

The account is 'powered by' ClearBank, which holds your money. 

You should check whether you have other funds with ClearBank, because the £120,000 protection applies to funds held with the banking institution as a whole rather than for each account. 

The account is complicated by the fact that there are five subscription plans paying various rates of interest.

The free tier and plus plan at £3.99 a month both offer a regular rate of 2.9 per cent. This steps up to 3.25 per cent on the premium plan, which costs £7.99 a month.

The top rate of 4 per cent is only offered on the most expensive plan – Ultra. This costs a whopping £55 a month but comes with a raft of add-ons including airport lounge access, WeWork credits and a Financial Times subscription.

Those on the Ultra plan can enjoy a 12-month average savings rate of 4.5 per cent with the boost. But £55 monthly is a steep cost and is only worthwhile if you make full use of the benefits on offer.

Keep in mind the account isn’t an individual savings account (Isa), so any interest earned above your personal savings allowance is subject to tax.

Cynergy Bank is currently offering 4.23 per cent variable on its easy-access saver, which includes a 2 per cent boost for 12 months.

This means you’ll experience a sharp rate drop after the year’s up, so you should remember to compare your options and switch.

Meanwhile Secure Trust Bank is offering a slightly lower 4.21 per cent variable, but this doesn’t include a short-term boost.

Rates are even better on the Isa front. If you haven’t made full use of your Isa allowance yet, it’s best to do so before using a taxable savings account.

The investing platform Trading 212* is offering 4.76 per cent variable on its cash Isa which includes a 1.16 per cent boost for 12 months.

Moneybox gets close to matching this at 4.75 per cent variable which includes a 1.30 per cent 12-month bonus.

However the underlying rate isn’t as strong as Trading 212’s, plus the minimum deposit is £500.

If you make more than three withdrawals in a year your rate plummets to 0.75 per cent.