A growing number of the bigger financial providers are concentrating their marketing on products that offer tangible rewards to loyal customers. In the past couple of years, Santander with its Zero products and Halifax with its Reward offerings are just two of the more high-profile examples in which the strategy has been to deliver exclusive deals for existing account holders.
The days when you could pick and choose the best personal finance products from a variety of banks or building societies appear to be over, and you'll need to maintain your current account or make regular use of your credit card with a provider to take advantage its tastiest deals. On Tuesday, Nationwide Building Society revamped its credit card range by replacing its existing "Gold" and "Classic" cards for new customers with a single and simply named "Nationwide Credit Card".
The card offers a 17-month interest-free balance transfer plus three months free on purchases or, if you're not interested in the balance-transfer offer, you can opt for a six-month interest free-purchases deal.
The real change comes on charges for overseas transactions. Most credit cards will charge a foreign loading fee of 2.75%-2.99% on each transaction. With the Nationwide Credit Card the fee is 2%, and frequent users have the opportunity to reduce or eliminate their overseas charges by using the card regularly in the UK.
For every £5 spent on purchases in this country, you'll earn an allowance of £1 commissio free purchases abroad. For example if you spend £3,000 over the course of 12 months (£250 per month) you'll accrue £600 of overseas commission free purchases. The amount you earn will be shown on your statement and doesn't have an expiry date.
It's a clever move by Britain's biggest building society as it will provide real benefits to customers who use the credit card, rather than its plastic being used purely as a cheap overseas payment mechanism by customers of other banks at which foreign charges are more expensive. Before this latest revamp, the cost of using a Nationwide credit card overseas was 1% (and free in Europe).
Keeping the best products and rates for those customers who use your services most, seems to be the way that providers are starting to think, and I'm sure we will see more examples of this in the coming months.
Index linked savings – what you need to know
with inflation proving extremely stubborn and running at double the Government's target, it's no great surprise to see savings providers starting to offer inflation-linked savings bonds.
While the index linked bonds from the likes of BM Savings and the Post Office will offer a level of protection against inflation – depending on future interest rate and/or inflation movements – it doesn't necessarily mean it will generate the biggest interest return.
If you opt for a current best buy five-year fixed rate bond from Aldermore or Principality BS, both paying 4.85% gross, you know exactly what your interest return will be until 2016. On a balance of £15,000 you would earn £727.50 gross or £582 per year after basic-rate tax.
Taking the BM Savings Inflation Rate Bond, for example, the interest is paid on 28 March each year and the rate is calculated as the RPI from the previous January plus 0.25%. So if, come January 2012, RPI is still 5.1%, you will receive a gross return of 5.35% and on £15,000 you would earn £802.50 gross or £642 for the year after basic-rate tax. If RPI were to jump to 5.8% your net return (allowing for the 0.25% bonus) on the BM product on £15k,000 would be £726 but if it falls to, say, 3.8% (+ 0.25%) your net annual return would be just £486.
At the same time that RPI may be falling, interest rates could also start rising and so fixed rates could rise too and you could potentially be missing out both ways.
If it's a hedge against inflation that you're after, then the Inflation Rate Bonds are worth a look. If you're looking to maximise your returns on a traditional fixed-rate bond then, with a base-rate hike looking increasingly likely, it's probably best to opt for a one or two-year deal and review your options at maturity.
Andrew Hagger is an analyst at Moneynet.co.uk