Banks eager for consumers’ cash are once again offering everything from “free” money to complimentary wine – but people would be wise to weigh up all of the options before shifting banks.
Typically, the new year starts with a flurry of offers. This year has been more muted until three of the major providers came out with new incentives.
First Direct is offering £100 cash to those customers switching to its 1st Account, while HSBC is offering £125 to anyone switching to its Advance or Premier current accounts. Virgin, meanwhile, is giving 12 bottles of wine and a £50 donation to charity.
It is a competitive market for customers as challenger banks increasingly attract their attention. Banks hope that any new account holders will then use other services, such as mortgages.
Offering money would seem to bear fruit. According to the Current Account Switch Service (Cass), set up by banks to smooth switching, Halifax gained more than 22,000 new accounts from July to September last year. In the middle of that same period, it had a £100 switching offer for new customers. During the same period, HSBC did not launch a cash offer until midway through September – and it lost almost 15,000 accounts.
However, consumers should look around at all providers before moving their money based on new offers, says Rachel Springall from financial information site, Moneyfacts.
“It’s good to see switching offers re-introduced as many were cut towards the end of 2020, but, as with any deal, it is vital consumers weigh up all the benefits and charges that an account provides,” she says.
“If consumers do decide to take advantage of a deal, they may well be tempted to acquire other products with the provider. But, again, it’s important they consider comparing to the wider market.
“There are increasing numbers switching to ‘challenger’ banks. Perhaps consumers are becoming wiser to what is essential for their day-to-day banking needs, which may well have been highlighted due to the pandemic. Service is just as important as a good deal during these challenging times.”
As ever, the new offers come with conditions. The First Direct offer is valid when customers switch their everyday banking using Cass, and pay in at least £1,000 within three months.
For the HSBC Advance account, customers must pay in £1,750 a month or £10,500 over six months. For the Premier account, you have to have an annual income of at least £75,000 and a mortgage, investment, life assurance policy or protection product with the bank – or £50,000 of savings within six months of opening the account.
The Virgin current account comes with a linked savings account which has to be credited with £1,000 within the first 31 days of opening it.
The thought of switching may cause a certain amount of anxiety to some consumers, but the process has been made easier in recent years to take just seven working days.
Under the Cass, the new bank should take care of moving all money going in and out (such as salary and direct debits) from the former account to the newly opened one.
For anyone who has not switched before, it is certainly worth seeing what the competition is offering to ensure you are getting the best deal.
Some accounts offer cashback for paying bills such as water, gas and electricity through them, although these can come with a fee.
Martin Lewis’ MoneySavingExpert highlights Santander’s 123 Lite – 3% is given back on water bills and 2% on gas, electricity, Santander home insurance and life protection – to a maximum of £15 a month.
For those who find themselves frequently in the red, they should focus on what the best rates are for overdrafts when choosing a new account, not what other features are offered.
First Direct 1st Account offers a £250 interest-free overdraft, as does the M&S current account.