The sting in the tale of low charges

Banks are wooing new customers while the old ones suffer

In the last few weeks, a number of the UK's biggest banks and insurance companies have cut charges to historic lows whilst also boosting the interest they pay on current accounts, but there are hidden stings in the tail of this otherwise good news story.

In the last few weeks, a number of the UK's biggest banks and insurance companies have cut charges to historic lows whilst also boosting the interest they pay on current accounts, but there are hidden stings in the tail of this otherwise good news story.

For instance, Halifax announced last week that it would pay 4 per cent interest on its current account, but it later emerged that half of the former building society's customers would face an unpleasant double-whammy. They will not qualify for its new current account, which will pay dramatically more interest than is available on the high street. They will also be faced with higher charges on their existing account.

The move to boost introductory rates is widespread, with banks and building societies facing unprecedented levels of competition for new customers. This has led to a situation where attractive headline rates are offered to new customers, while existing ones are left languishing in worse accounts.

The new current account at Halifax is theoretically open to everyone - old and new customers alike. Yet customers must pay a minimum of £1,000 into it each month, or maintain a balance of at least £500 in order to receive the 4 per cent interest. Halifax's existing two million current-account holders face no such minimum requirements.

In addition, they will see the agreed overdraft rate on the existing Halifax current account rise from 14.2 per cent to 19.6 per cent and will have to pay a new monthly £5 charge if they go overdrawn. Halifax has pointed out that these charges are no worse than those at most high-street banks, and the differentiated rates were designed to motivate more of its customers with multiple current accounts to have their primary account with Halifax rather than a competitor.

But consumer groups have criticised the move. Melanie Green, a senior researcher for the consumer magazine Which? said: "Even if this affects (only) a quarter of Halifax customers, in the end it is unacceptable. This practice is shocking and does not reward the many customers who have stayed loyal to their bank or building society."

Across the industry, existing customers can usually move over to a new rate, but often they are not made aware of newer, better offers by their banks. Under the Banking Code, banks are obliged to notify customers if they introduce an account with very similar conditions like charges, interest rates and access.

But the Code does not require banks to make people aware of new accounts that would generally be considered better deals but which have different conditions, apart from in a once-a-year letter to all customers detailing products on offer. Lloyds TSB, Barclays and NatWest all comply with this, and put adverts in newspapers and leaflets in branches about new products.

But this compares starkly with effort invested in attracting new customers. Available to customers who transfer to Lloyds, but not to its own customers, is a "Switchers Package", with a six-months free overdraft and other benefits.

The internet banks Cahoot and Smile have said they will notify all customers of new products. So far, both banks have the same range of accounts as when they were launched.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Sport
footballLIVE City face Stoke, while Warnock returns to Palace dugout
Arts and Entertainment
books
Life and Style
3D printed bump keys can access almost any lock
gadgets + techSoftware needs photo of lock and not much more
News
i100
PROMOTED VIDEO
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind the scenes to watch the latest series
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
News
i100
News
The slice of Prince Charles and Princess Diana's wedding cake and the original box from 29 July 1981
newsPiece of Charles and Diana's wedding cake sold at auction in US
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

    £35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

    DevOps Engineer (Systems Administration, Linux, Shell, Bash)

    £50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

    Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

    £60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

    Financial Technical Consultant (C++, C#, Finance, MSc, PhD)

    £50000 per annum: Harrington Starr: Financial Technical Consultant (C++, C#, F...

    Day In a Page

    Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

    The phoney war is over

    Russian troops and armour pour into Ukraine
    Potatoes could be off the menu as crop pests threaten UK

    Potatoes could be off the menu as crop pests threaten UK

    The world’s entire food system is under attack - and Britain is most at risk, according to a new study
    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
    From Mozart to Orson Welles: Creative geniuses who peaked too soon

    Creative geniuses who peaked too soon

    After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
    Caught in the crossfire of a cyber Cold War

    Caught in the crossfire of a cyber Cold War

    Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

    Salomé: A head for seduction

    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
    From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

    British Library celebrates all things Gothic

    Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
    The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

    Is the Hard Rock Café worth fighting for?

    The restaurant chain's owners are currently embroiled in a bitter legal dispute
    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

    In search of Caribbean soul food

    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
    11 best face powders

    11 best face powders

    Sweep away shiny skin with our pick of the best pressed and loose powder bases
    England vs Norway: Roy Hodgson's hands tied by exploding top flight

    Roy Hodgson's hands tied by exploding top flight

    Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
    Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

    Di Maria and Ronaldo: A tale of two Manchester United No 7s

    They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
    Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

    Robert Fisk: No victory for Israel despite weeks of devastation

    Palestinians have won: they are still in Gaza, and Hamas is still there
    Mary Beard writes character reference for Twitter troll who called her a 'slut'

    Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

    The Cambridge University classicist even wrote the student a character reference
    America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

    America’s new apartheid

    Prosperous white districts are choosing to break away from black cities and go it alone