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.

Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Voices
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
Sport
world cup 2014
Sport
Popes current and former won't be watching the football together
PROMOTED VIDEO
Sport
News
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
business
News
Mick Jagger performing at Glastonbury
people
Sport
Germany's Andre Greipel crosses the finish line to win the sixth stage of the Tour de France cycling race over 194 kilometers (120.5 miles) with start in Arras and finish in Reims, France
tour de franceGerman champion achieves sixth Tour stage win in Reims
Extras
indybest
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
News
people
Arts and Entertainment
Chocolat author Joanne Harris has spoken about the financial struggles most authors face
books
Finacial products from our partners
Property search
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

    Business Analyst Consultant (Financial Services)

    £60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

    Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

    £60000 per annum: Harrington Starr: A leading provider in investment managemen...

    AVS, JVS Openlink Endur Developer

    £600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

    Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

    £30000 per annum: Harrington Starr: A global leader in trading platforms and e...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
    Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

    Hollywood targets Asian audiences

    The world's second biggest movie market is fast becoming the Hollywood studios' most crucial
    Grindr founder Joel Simkhai: 'I've found love on my dating app - and my mum keeps trying to hook me up!'

    Grindr founder Joel Simkhai: 'I've found love on my dating app'

    Five years on from its launch and Grindr is the world's most popular dating app for gay men. Its founder Joel Simkhai answers his critics, describes his isolation as a child
    Autocorrect has its uses but it can go rogue with embarrassing results - so is it time to ditch it?

    Is it time to ditch autocorrect?

    Matthew J X Malady persuaded friends to message manually instead, but failed to factor in fat fingers and drunk texting
    10 best girls' summer dresses

    Frock chick: 10 best girls' summer dresses

    Get them ready for the holidays with these cool and pretty options 
    Westminster’s dark secret: Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together

    Westminster’s dark secret

    Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together
    A History of the First World War in 100 Moments: Dulce et decorum est - a life cut short for a poet whose work achieved immortality

    A History of the First World War in 100 Moments

    Dulce et decorum est: a life cut short for a poet whose work achieved immortality
    Google tells popular music website to censor album cover art in 'sexually explicit content' ban

    Naked censorship?

    The strange case of Google, the music website and the nudity take-down requests