'I like having everything under one roof, moving money easily'

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The Independent Online

HBOS, the Halifax and Bank of Scotland group, and Lloyds TSB struck fresh blows this week in the battle to persuade us to let them become our cradle-to-grave, one-stop shop for all our financial needs. HBOS unveiled Extras, a packaged account offering free roadside assistance, European travel insurance and current account interest, as long as customers pay in £1,000 a month. Lloyds signed a deal with ScottishPower and Cable & Wireless to offer customers cheaper phone and fuel bills.

It sounds seductive to use one bank for everything. You would have just one phone number, one branch or one website.

This is just what the banks want us to do, and the reality is that more than half of us think no further than one institution for most of our banking needs. But this convenience comes at a high price. While the big banks offer an enormous range of financial products, from current accounts to buildings insurance, you are unlikely to get a good deal if you buy all from the same provider.

The Consumers' Association's Which? magazine did comprehensive research into a range of nine products offered by the 11 biggest banks and building societies. It found that none of the banks could be relied on to give consistently good value. "None of them offers good value for all nine products, although a few do offer the best rates for one or two," Which? says.

Alliance & Leicester was rated most expensive, and Nationwide was cheapest, but its products would still cost a customer nearly £700 a year more than if someone had gone for best buys in each category.

So, according to Which?, you are bound to lose by restricting yourself to one bank for several types of account and insurance. But the banks are keen to sell their customers as many of their products as possible. A former employee of a banking and insurance group said staff were told to sell a minimum of four products to each customer, the rationale being that customers would be more likely to remain loyal and use it as their first stop for any other insurance or banking needs.

And, on the whole, consumers do tend to treat their bank as a one-stop shop. Research by HBOS's Intelligent Finance suggests that 51 percent of us use only one bank for all our day-to-day banking. IF says this shows that the UK public want a "monogamous" relationship with their bank.

Packaged current accounts, which several of the big banks offer, are a key part of their marketing strategy. These accounts, which until recently cost between £5 and £12 a month and typically offer free annual travel insurance, preferential rates on savings and borrowing and a host of other benefits, certainly make it harder for users to compare the overall cost of accounts. On the whole, these accounts are only worthwhile if you are going to make use of the features they offer. Otherwise they are an unnecessary commitment, even though HBOS, Alliance & Leicester and Lloyds are offering what are made to look like free deals.

IF is among the many providers now offering offset banking, multiple accounts where credit balances are taken into account before interest is charged on borrowings. It says offset banking allows people to have their cake and eat it, with the convenience of keeping all their day-to-day banking with one bank without sacrificing value for money.

Offset banking can fit the bill for people who have erratic incomes, but it may not be suitable for others, Fiona Price, of the IFA Fiona Price & Partners, says. "In many ways it can work very well, but not for everyone," she says. "It will be slightly more expensive on the borrowing side, but slightly better for savings."

It is crucial that people who take out these offset arrangements are very disciplined with their money, Ms Price says. "If not, you just spend (the available credit). There have been a number of cases we've come across where that's happened." It is hard for any bank to be all things to all people, says Lin Ashhurst of the independent financial adviser, Norton Partners in Bristol. If you want the convenience of having all your accounts under one roof, it is important to be aware of the price you are paying for it. Check out the rates that competitors are offering first.

Even with savings accounts, Ms Ashurst acknowledges it is inconvenient to change account providers frequently. "Unless you're going to spend your whole time switching, it's good to look for a consistent provider."

It is the smaller building societies and the mutuals, and other institutions such as Yorkshire, Britannia, Legal & General, Nationwide, Scottish Widows and Standard Life which tend to offer more consistently good interest rates on savings, Nanette Whitwood, of the financial data firm Moneyfacts, says. "They don't tend to launch new products just to get into the best buy tables,and then leave their other customers standing. They tend to have reasonably good rates across the board."

If you want to stick to one bank for more than one type of account, pick one that appears regularly in the best-buy tables. But you still cannot afford to sit back forever, Rebecca Fearnley of the Consumers' Association, says. "Even then, it's a matter of keeping an eye on things, because if they are (in the best-buy tables now) it doesn't mean they'll stay there. Fundamentally, what we say is, shop around."

WHEN SIMON Reynolds pays his credit card balance or adds to his savings, he has only one website to go to. He now banks with the Halifax subsidiary Intelligent Finance, and has used the full range of IF's offerings, current account, savings account, personal loan, credit card and mortgage.

He has no mortgage, because he and his partner, Karen Heath, are renting, between selling their home in the Nottinghamshire village of Watnell, and buying another.

Apart from IF's much-trumpeted financial benefit of offsetting, having linked accounts where the bank takes account of the money he has deposited before charging interest on the money he has borrowed, Mr Reynolds appreciates having everything under one roof, and being able to move money around easily.

His e-business is based on graphic design and new media. Flexible banking, where borrowing can easily be increased and repaid any time suits Mr Reynolds. Some months his income is low, then a large sum will arrive. He says: "If you have no savings, it's probably no use." Mr Reynolds is dissatisfied with NatWest, part of Royal Bank of Scotland. "It's the inflexibility of dealing with a big bank I find unpalatable," he says, adding that IF has been much more friendly and accessible.


* Cahoot: www.cahoot.com

* NG Direct: 0800 376 7799

* Lombard Direct: 0800 215000

* Kent Reliance: 0800 783 4248

* Intelligent Finance: 0845 609 4343

* Direct Line: 0845 2468910

* Yorkshire Building Society: 0845 1200 300

* Britannia: 0800 132304

* Legal & General Savings: 0845 609 0705

* Nationwide: 0800 302010

* Scottish Widows Bank: 0845 845 0829

* Standard Life Bank: 0845 755 5657

* Fiona Price: 020 7611 4700

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