How to pick the best current account
The slew of incentives to switch banks can be confusing. Joia Shillingford offers tips on how to untangle the offers
Sunday 22 January 2012
Major banks and building societies are offering up to £300 - or other incentives like free overdrafts or good savings rates – if you switch your current account to them. Why are they waging a price war for your business, what are the best offers and what strings are attached?
The emergence of new banking players such as Metro Bank and Virgin is shaking up retail banking. Besides that, banks have always been keen to acquire new current accounts as they see them as the gateway to a customer's personal finances.
Andrew Hagger, of price comparison website Moneynet.co.uk, says: "The deals banks are offering will be seen as loss leaders. Once they have your current account, they may be able to sell you a pension in the long run."
Among the best incentives for switching accounts is HSBC's offer of 6 per cent interest on balances of up to £2,500. First Direct, which has a good reputation for customer service, is offering £100 if you switch, plus the possibility of another £100 if you are not happy with their customer service in the first six months.
Halifax pays £100 upfront, whereas with many of the other cash offers the customer receives the money after three months once they have paid in the monthly amounts required.
Spanish-owned bank Santander has had its offer available for a while. They call it 300, 200, 100. To qualify for £300, you must already have a mortgage with Santander and switch £10,000 of savings plus your current account to it. For £200, you must already have a mortgage with it and switch your current account. And for £100, you need to switch just your current account to Santander.
Not all lures come in the form of cashback. Some financial institutions simply offer above-average rates on savings or below-average rates on loans, such as 0 per cent on your overdraft once you have switched your current account.
Sometimes there are incidental benefits to switching accounts. In doing so, you may leave a bank whose customer service you are not happy with – the usual reason for changing accounts. Or it might make you take a long, hard look at your finances; not a bad idea at the beginning of the year.
There may be fringe benefits. John Lord, 63 and his wife Angela opened a joint Privilege Premier account with The Co-operative Bank last October. He says: "My wife and I had banked with NatWest for years and stumbled across the Co-operative Bank's Privilege Premier current account when looking for car insurance. We noticed that the account came with comprehensive travel insurance, mobile telephone cover and RAC breakdown. Combined with the £200 switching offer, that made us think switching would be a good idea.
"We found the process really easy and have no intentions of leaving the bank now we've received our £200."
Rachel Springall of Moneyfacts.co.uk says: "When choosing a current account, customers need to decide its main purpose – whether it is for earning interest, or an overdraft they can dip into at low cost – as well as considering the incentive package."
Also worth taking into account is that some banks have started to add steep extra charges for minor items, rather in the manner of budget airlines. One example is the £5 that Clydesdale Bank charges for a duplicate statement, up from £2.
Bear in mind, too, that special offers on savings or loans tend to end after 12 months, so work out which of the accounts will give you the best combination of interest, convenience and low charges in the long run.
It isn't always obvious and you may need to look at the terms and conditions. For example, check what the unauthorised overdraft fee is.
Once you have decided to move, the good news is that switching accounts has become easier. "A lot of banks have dedicated switching teams in place," says Mr Hagger. Direct debits can usually be switched across automatically but you will have to inform your employer and other people who pay money into your account that you have moved.
"Some people are reluctant to change because things weren't so slick a few years back ," says Hagger "Nevertheless people are going to have to go through some minor inconvenience, such as having to get new cards and PIN numbers and learn a new layout of internet banking."
Ms Springall urges those who have found a new deal that suits their lifestyle or who were planning to change current accounts anyway, not to wait too long. She says: "Switcher offers tend not to stay around for long, so customers need to consider whether it's a good time to move and, if so, act quickly."
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
How to cut the cost of car insurance: A five-step guide to getting a better deal
How not to go into the red over Christmas
Simon Read: The only place for debt is out in the open, don't be afraid to ask for advice
Families pay the price of superfast broadband
Donald MacInnes: I was fired for making up horoscopes and then my lifestyle deteriorated
- 1 This is what the one in ten British men who pay for sex need to know
- 2 Lee Evans announces retirement from comedy on The Jonathan Ross Show
- 3 These grandmas smoking weed for the first time are wonderful
- 4 Woman opens professional cuddling shop – gets 10,000 customers in first week
- 5 Angelina Jolie confuses everyone with 'ay up me duck' East Midland's greeting to Derby actor Jack O'Connell at awards show
'Muslims pre-date Columbus in discovering America,' says Turkish president Erdogan
France 'blocks' Russian sailors from boarding a warship
Former Tory PM Sir John Major says 'we would not have an NHS without migrants'
G20 summit: David Cameron warns Vladimir Putin that Russia's relationship with the West is at a 'fork in the road' over Ukraine
Myleene Klass: Ed Miliband 'strikes back' by comparing UK's need for Labour's mansion tax to Hear'Say track
Coalition government has 'shifted money from poorest to better-off' through welfare cuts and tax reductions, study claims
iJobs Money & Business
£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
$175 - $200 per annum, Benefits: full benefits: Carlton Senior Appointments: P...
Not specified: Carlton Senior Appointments: Senior MD Financial Advisor - San ...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens