They're bidding for your account

The banks want to tempt you. Take advantage of their enticements, says Jenne Mannion

Britain's banks are battling for current account business and the winner is the customer. Whether it's a £50 golden hello for signing up for a new account, 1 per cent cash-back on any purchases, or a hefty 8 per cent interest rate on a savings account that appeals, it's time to consider the many exciting offers available in the market place and possibly switch to a bank that is prepared to pay for your business.

Last Monday, Halifax launched a current account that gives you money back for spending on your debit card. The Halifax Moneyback Current Account offers 1 per cent cash-back, tax free, on debit card purchases up to a total of £10,000 a year. Halifax calculates that this cash-back is potentially worth approximately £100 a year to the average UK household. The account, however, pays 0.5 per cent interest.

According to Stuart Glendinning, director of current accounts at price comparison website, this is a good way for customers who do not have a big credit sum to benefit from the annual interest rate to be rewarded for their custom.

He said customers could earn 15 per cent more by using this cash-back facility than through any other higher-paying interest account or those that pay a lump sum when you sign up. Importantly, he said, the Halifax has shaken up the current account market, with other groups coming out with offers.

Days before Halifax's cash-back offer, Lloyds TSB launched a £50 golden hello offer to people who switch to Lloyds Classic Plus Current Account. It has also increased interest to 4 per cent AER. Existing customers are being offered £50 for every new current account customer they introduce to Lloyds TSB, provided that new customer credits their account with at least £500 per month.

Alliance & Leicester has a golden hello in its Premier Current Account. Although you are paid a lesser amount of £20 on signing up, the interest rate is higher at 5 per cent AER.

While Citibank is not offering any lump sum for signing up, its Direct Current Account has a highly competitive interest rate of 4.59 per cent AER.

There are conditions associated with these more attractive current accounts; for instance, you must have at least £1,000 credited monthly.

HSBC is offering a savings account that pays 8 per cent AER - the highest on the market. The Regular Saver offer is only available to HSBC's existing current account holders or those who switch their main current account to HSBC.

But there are restrictions. The 8 per cent only applies if no withdrawals are made and you must make monthly contributions of between £25 and £250. The maximum annual saving is £3,000. Halifax launched a similar account last year, paying 7 per cent.

Sue Hannums, savings director at Chase de Vere, Bath, warned that customers should not be fooled by the short-term gains, as a current account is something that you tend to stick with for many years. Consider the whole package over the longer term.

"The zero per cent overdraft rate on approved purchases for the Alliance & Leicester current account may equate to much more if you tend to be in overdraft a lot of the time. Or the 4.59 per cent Citibank rate is better for those who tend to maintain reasonable balances."

Ms Hannums said she doubts that many will change. "People simply cannot deal with the bother." Certainly, there is a lack of interest in what is on offer among current accounts. A survey by the Norwich & Peterborough Building Society found 63 per cent of customers don't know what rate of interest their current account pays.

The survey found that more women have switched current accounts, with 34 per cent doing so, compared with 26 per cent of men. When those who haven't ever switched their current account were asked why not, 65 per cent said they were happy, 25 per cent said they couldn't be bothered, and 7 per cent didn't know how to go about it.

Louisa McDonough signed up for HSBC's Regular Saver 8 per cent interest accountimmediately after hearing about it. Louisa, who lives with her husband, Darwin, and children, Ryan, six, and Charlie, four months, will save £150 per month in the account. Her aim is to build up a deposit to be able to buy a house.

Louisa and Darwin, 33 and 37 respectively, work in the Air Force and rent in Telford. Louisa has had an account with HSBC for nine years. She said with trying to save hard, the higher interest payment is a welcome benefit: "What I like is that you can't touch the money. We are really trying to save, so it is good not to be tempted."