Greater number of current account providers offering cash sweeteners

18th January 2016

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While current accounts are now well-known for their perks, which can include such items as insurance add-ons a greater number of providers are now raising the game by offering cash bonuses to tempt new customers.

In fact since the introduction of the Current Account Switch Guarantee in 2013, research hub Moneyfacts.co.uk has witnessed a sharp rise in the number of cash incentives being offered with to customers, with some deals now boasting sums of up to £220 a year.

The group found that the latest offers can provide customers with more cash upfront than what they could earn in a whole year of saving with a standard savings account.

For example, the £150 gained when switching to Yorkshire Bank’s fee-free Current Account Direct could only be matched by a savings account paying an interest rate of 7.5% yearly on a £2,000 balance.

Elsewhere M&S Bank and is offering switchers the chance to make £220 a year while the Halifax Reward Current Account is offering up to £175. For its part First Direct has a £125 offer (see box below).

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Current account providers are pulling out all the stops to grab the attention of new customers by rewarding switchers with a cash injection. Thanks to this competition, savers who are struggling to get a decent return with standard savings accounts may be more than interested in what these providers have to offer.”

Moneyfacts.co.uk highlighted that more than 70,000 people switched their current account using the switch service in December, and as 2016 begins some consumers may find that they are paying over the odds for their account or that they are not making the most of any add-ons, so a quick switch could be in order.

Springhall added: Competition between current account providers is therefore likely to continue this year, particularly as the Competition and Market Authority (CMA) is expected to give its final report on the retail banking market in April.

“However, while cash incentives shouldn’t be ignored, customers should choose a current account based on its overall package to ensure it covers all their financial requirements. This is particularly important if they want a reasonable overdraft to cover any unexpected outgoings, otherwise they could end up being stung with excessive fees.”

Selection of providers with switching cash incentives

Type of reward gained (cashback on switching / spending per month)

Yearly cash earned

Equivalent interest rate (based on £2,000)

M&S Bank Current Account

£100 (gift card) + an additional £10pm (a) (gift card) (£120pa)

£220

11.00%

Halifax Reward Current Account

£100 (switch) + £6.25pm gross (£75pa gross)

£175

8.75%

Yorkshire Bank Current Account Direct (b)

£150 (switch)

£150

7.50%

first direct 1st Account

£125 (switch)

£125

6.25%

HSBC Advance

£120 (switch)

£120

6.00%

The Co-operative Bank Current Account

Up to £4pm + £1.50pm on debit card spending (£66pa)

£66

3.30%

Barclays Bank Account

Blue Rewards £4pm (c) (£48pa)

£48

2.40%

(a) Dependent on minimum funding of account. (b) Account also offered by Clydesdale Bank.
(c) Cash received after monthly fee of £3 taken – more rewards available if certain Barclays products are held.
Source: www.moneyfacts.co.uk 18.1.16

 

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