Banks are offering customers free cash for switching their current accounts. The UK’s big four – Barclays, HSBC, Lloyds and RBS – have been shaken up by the arrival of newcomers, from online-only “challenger” banks to European giants. Banks are working harder to draw customers, with several offering between £100-£200 to newcomers.
“It appears free-in-credit accounts are becoming reward-in-credit accounts. In essence, this means... the bank will pay customers for using them,” says Brian Brown from industry specialists Defaqto.
Their research says one-off bonuses are on the decline, so savvy customers should make the most of them while they last. It may be worth switching between them from time to time – it’s an interesting way to try out different banks’ services too as they vary widely. Some give customers preferential rates on savings accounts and mortgages.
Alongside the one-off cash payment, some are also handing out small monthly credits. The Co-op Bank and Halifax offer around £5 a month through their incentive programmes. While it’s a small amount, it’s worth thinking of this £60 a year as extra interest – useful at a time when many savings accounts are paying next to nothing.
HOW TO CHANGE BANK
Changing bank accounts is much easier these days. The UK now has a seven-day switching service which means after the forms are filled in, the onus is on the new bank to shift all incoming and outgoing payments to your new account. This includes direct debits, bill payments and incoming salary and pensions payments. It will all be done within seven working days, and the old account will be closed too. See more at the official website, Simplerworld.co.uk.
It’s aimed at improving competition in the sleepy world of banking, where nearly 60 per cent of people have been with the same bank for over 10 years. Around 70 per cent of people have their account with one of the Big Four – Barclays, HSBC, Lloyds and RBS.
To qualify for the cash bonus, typically customers will have to switch over fully to the new bank and pay in a minimum amount monthly. Usually customers will have to transfer over direct debits too – this can be as many as four, and standing orders don’t count.
A tip for people who don’t have sufficient direct debits: set up a “minimum payment” to a credit card. Even if the balance on the credit card is zero, and the card company takes nothing each month, it still counts as an active direct debit.
HSBC is among the most generous. It offers £150 to switch to its HSBC Advance account, plus a further £50 bonus when the account’s been open for a year. The offer runs until 10 July. Two direct debits must be switched, and customers will be given a 0 per cent overdraft for six months.
Customers can also qualify for a savings account with a 6 per cent interest rate. The minimum monthly deposit is relatively high, at £1,750 a month (which equates to a £26,300 salary) or £10,500 every six months.
First Direct is also giving newcomers £100 for signing up to its 1st Account, alongside eligibility for a savings account paying 6 per cent interest and a free overdraft. In an unusual twist, First Direct will also give unhappy customers £100 when they leave, between six months and year after joining.
That said, this bank does have the highest approval rating of any surveyed by the Money Saving Expert website. Ninety-two per cent of its customers say it’s great.
There is also a £10 monthly fee for this account, but it’s waived each month if £1,000 is paid in. Not an issue for people in regular work.
FREE CASH AND ON-GOING BONUSES
The Co-op Bank pays £150 to switch to its Standard Current Account. Customers can also join its reward programme which pays up to £5.50 a month (over £60 a year) as a cash bonus for doing ordinary things with the account such as paying in a salary, using online banking and paying by debit card. It’s also attractive as an ethical bank. To qualify, people must switch four direct debits, and there’s no minimum amount to pay in each month.
Meanwhile, Halifax gives new customers £125 for signing up to its Reward account. This offer runs until 18 July. There’s also an ongoing £5 per month bonus which is paid to customers who, again, do very average things with their account including paying in £750 each month, staying in credit and keeping two direct debits active.