Don’t bank on loyalty
EVERYBODY gets mad with their bank from time to time, but the only way to get even is to take your business to a rival. You can make hassle-free switches in just seven working days, and take all your payments and direct debits with you.
The big high street banks are battling to offer new customers upfront cash payments and monthly perks, which could total as much £200. So does it pay to make the switch or are there hidden pitfalls?
REWARDING MOVE
Loyalty to banks is not what it used to be, with more than five million moving account since the free Current Account Switching Service (CASS) was launched in 2013.
Banks are giving people a clear financial incentive to switch, by handing out free cash to new customers. The NatWest Reward Account gives you a £150 upfront payment, up from £125 this time last year.
You get £75 for switching to an HSBC
Bank Account and £150 on its Advance Bank Account, while First Direct’s award-winning 1st Account pays £100.
The Halifax Reward Current Account pays £50 upfront then another £85 after six months, totalling £135.
M&S Bank’s Current Account gives you a £100 gift card straightaway, plus another £80 gift card after 12 months. Existing M&S credit card customers who “switch and stay” can get up to £220.
However, these payments are aimed at customers who switch their everyday banking from a rival bank – existing customers cannot benefit.
SWITCH ON
Rachel Springall, finance expert at MoneyFacts.co.uk, said January is peak season for cash incentives, but this should not be the only reason to switch: “You could end up out of pocket if your new account does not pay any interest if you are in credit, or has higher overdraft charges.”
Other factors, such as the quality of customer service and branch access, should also guide your decision.
Latest figures from CASS show that Nationwide attracted most switchers, with a net gain of 34,000 new account holders in the three months to September 30, whereas TSB made a net loss of 17,000 customers, with many angry at its IT shutdown.
Check whether your chosen account charges a monthly fee, and what you get in return. Springall said: “The popular Santander 123 Current Account pays a variable 1.5 per cent on balances up to £20,000, plus cashback on household bills paid by direct debit, for a £5 per month fee.”
Some might be tempted by the new breed of challenger banks. She added: “Banks like Starling are gaining new customers with fuss-free alternatives to traditional banking, in this case, digital mobile-only banking.”
PACKAGE IT UP
DJB Research banking expert David Black said read the small print as you may have to pay in a minimum monthly sum and set up a couple of direct debits. For instance, with NatWest Reward you need to pay in £1,500 a month and log into online or mobile banking at least once every three months. There is also a £2 monthly fee.
If you use CASS, your old current account will be closed automatically when the switch is complete. Black said you should also consider “packaged current accounts” that charge a monthly fee but give you benefits such as travel insurance, mobile phone cover and motor breakdown: “Check you are not already paying for these benefits elsewhere, though.”
PASSWORD PROBLEM
Andrew Hagger, personal finance specialist at MoneyComms.co.uk, said banks that pay the most generous in-credit interest tend to charge more for overdrafts: “If you dip into the red now and again, check overdraft costs before switching. For example, Halifax and Lloyds can charge three times more than First Direct, Post Office and M&S Bank.”
Although switching bank is fairly painless, he says there is one sticking point: “You will have to get used to different online and mobile banking set-ups, and remember new passwords.”