It's a January sale – at a bank near you
There are bargains to be had by existing customers as well as new. But don't forget to shop around. Chiara Cavaglieri reports
Sunday 10 January 2010
Britons love anything with the word "sale" attached – just ask the retailers. Or HSBC, which launched its sixth annual sale last week. Lasting until 13 February, it offers discounts and incentives across the board, including 12 months of home insurance cover for the price of nine. Other discounts are up for grabs on mortgages, investments and pensions.
Most of the offers are aimed at either attracting new banking customers or persuading existing account holders to stay put. For example, the Plus account, which HSBC says offers up to £395 of benefits such as life cover, worldwide travel insurance and breakdown cover, would normally cost £12.95 per month, but customers applying during the sale period can receive the account for £6 a month for six months. There is also £50 cashback as an extra incentive, which is also available to people switching to the fee-free HSBC bank account.
HSBC has even followed in the footsteps of First Direct and Alliance & Leicester by offering a £100 incentive for customers switching to its Premier account. However, this is an exclusive account for customers with at least £50,000 of savings or investments with HSBC, who pay their annual income into the account, or customers with an individual income of at least £100,000, which again must be paid into the account.
HSBC is not alone in targeting current account customers with special offers. Many banks are focusing their cross-selling tactics on current account customers with a series of exclusive offers.
"Banks see the current account as the main relationship builder with the customer and it also enables them to have a much better understanding of the financial capabilities of each customer," says David Black, a banking specialist at Defaqto.
Halifax launched its own range of special offers last week for current account holders who deposit at least £1,000 each month, or Ultimate Reward current account holders. The offers include an extra 0.2 per cent on various savings products for one year and an extra three months at 0 per cent on purchases with the Halifax All in One Card.
Some Halifax mortgages are available with a reduction of between 0.2 per cent and 0.4 per cent. For example, the two-year fixed rate mortgage, which has a £995 fee and a maximum 60 per cent loan-to-value ratio, is reduced from 3.99 per cent to 3.69 per cent. These offers can work the other way round, with Santander offering its Zero current account exclusively to Abbey mortgage customers from tomorrow.
While discounts and freebies are not to be scoffed at, the risk is that customers will be too easily swayed and forget to shop around to see if there are better deals on offer.
"HSBC has run this sale for a number of years so it obviously works for it, but there is a danger that customers can get complacent, thinking that, because it's got a sale tag, it's a good deal," says Kevin Mountford, the head of banking and credit cards at comparison site Moneysupermarket.com.
Andrew Hagger, a money analyst from financial information service Moneynet.co.uk, is equivocal about the January offers. "Bank sales are little more than a marketing gimmick, most customers would prefer a consistently good deal from their provider, rather than just for a few weeks each year," he says.
For example, both First Direct and Alliance & Leicester are far less stringent about the terms and conditions of their cashback offers. First Direct offers £100 cashback to customers who switch to its current account and pay in at least £1,500 for the first three months, and Alliance & Leicester is reintroducing a £100 incentive tomorrow for new customers switching to its Premier current account who top up their ballances with at least £500 each month.
HSBC's special offers for existing customers include 50 per cent off LifeChoices insurance premiums for Plus and Premier current account customers for nine months, available for an extended period until 26 February. Similarly, for savers, HSBC has increased its standard rates for the Fixed Rate Saver by 0.75 per cent for three- or five-year terms for its Plus and Premier customers.
Once again, even with the bonus bringing both the three- and five-year accounts to a far more competitive 4.25 per cent, it pays to shop around. For example, on a three-year fixed-rate bond, ICICI Bank pays 4.7 per cent, while savers can earn 4.5 per cent with Halifax.
"Bank products are not always one size fits all, so before you look to bag your New Year bargain, take a few minutes to check out the competition as there may be better and more suitable deals available," says Mr Hagger.
That's not to say that banking offers aren't worth checking out, however. Nationwide building society, for example, is offering a market-leading unsecured loan at 7.6 per cent APR for loans from £7,500 to £14,000 for up to five years, but only to its current account customers.
First Direct current account holders have exclusive access to regular savings accounts paying an impressive 5 per cent AER, fixed for 12 months. This account requires savers to put away at least £25 on the same day each month and no withdrawals can be made within the 12-month period. By comparison, the best regular saver which offers a fixed rate is from Principality building society, which pays 4.5 per cent AER on deposits between £20 and £500 per month.
HSBC is also offering mortgage customers who take out a home loan before the sale ends on 13 February a 2.29 per cent discount mortgage, at a reduction of 1.65 per cent off HSBC's standard variable rate of 3.94 per cent for two years. This offer is available only to customers with a deposit of 40 per cent of their property value, but the reduction makes it 1.3 per cent cheaper than the best two-year fixed rate around at the moment. But do watch out for the relatively high fee of £1,499.
"For people that can't be bothered to shop around and are looking for a one-stop shop, there is some value in these types of offers. But as a word of caution, particularly with any short-term incentives, you've got to make sure the underlying product is right for you," says Mr Mountford of Moneysupermarket.com.
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