With so many different options to choose from, there is no shortage of opportunity to review rates and switch to a personal banking solution that offers favourable terms. However, despite the wide range of offers available, many people remain with their existing current account provider even when their rates are less than competitive. This inertia is generally attributed to the fact that consumers simply don’t realise the ease with which they can switch to a more effective account. Some develop brand loyalty over time that prevents them from shopping around for more effective deals.
Are you paying for the privilege of saving with a bank?
A new study by Savings Champion, the UK financial advice service, indicates that there are over 600 savings accounts (14% of all UK bank accounts held) which actually pay out less than 0.3% interest on monies held. Essentially, this means that consumers are actually paying their bank to store their cash, as the rate of inflation is higher than the accrued interest within these accounts. Popular current accounts from Nationwide, Natwest, First Direct and others offer 0% interest, which amounts to customers paying the bank to hold onto their money for them.
Choosing the best current account to switch to
Given the prevalence of poor rewards for consumers, it’s important to shop around and switch current accounts periodically, to make sure that you benefit from the best possible deals on the market. If you’re confused about the various rates available, follow this quick guide to select the best current accounts and start getting a better return on your hard-earned cash.
Best “Switch Accounts” Offers
Barclays Current Account
Barclays doesn't offer any upfront cash to switch to it but you can earn at least £14 per month for the first 12 months via its Blue Rewards Scheme (the rewards fall to £7 per month after 12 months. It’s a bit of work to earn the rewards - you must pay in £800 per month and pay out 2 direct debits and be signed up to their mobile app or online banking. The account pays no interest and there is also the downside of a £3 per month charge for the account. If you have other Barclays products such as a mortgage, loan or insurance the benefits increase.
M&S Bank offer a £125 M&S Gift Card if you switch to it. You can also earn an extra £5 per month (added to the gift card each month) when you pay in £1,000 per month and maintain 2 active direct debits. This online-only bank account has no monthly fee and an interest-free overdraft of £100. In addition, you will earn 1 point for every £1 spend on your M&S Debit Card in store via the M&S Loyalty Scheme.
Another benefit of M&S Bank is you get access to its 5% Regular Saving account. This savings account is one of highest interest paying savings account on the market. You can earn 5% AED/gross fixed interest rate on deposits of between £25 and £250 per month, up to £3,000 in any year.
The First Direct "1st Account" allows for £250 of interest-free overdraft, and comes with a ‘satisfaction guarantee' – if you don't like the account, the bank will give you £100 (though you need to have deposited £1,000 every month for 6 months beforehand). The bank will also give you £150 gift for joining, though you have to have deposited £1,000 in the account within 3 months of the open date. First Direct also offers ‘text message banking' which allows you to receive a mini statement by phone, know when you reach your overdraft, and other information as well.
Best Accounts For Interest On Savings
TSB’s Classic Plus
The TSB Classic Plus is one of the best current accounts available at the moment. It offers 3% on balances up to £1,500. It also offers up to £10 per month cashback based on paying at least 2 direct debits per month from the account and making 20 debit card transactions per month. These cashback offers are available until 31st December 2018.
The downside is that customers wanting to use the account are required to pay in a minimum of £500 each month to benefit from the rate. They also need to register for the online banking function and opt for paperless statements.
FlexDirect from Nationwide also pays out 5% interest for account holders. The rate is applied for all savings held in the account, up to a maximum of £2,500. The downside, however, is that anyone wishing to use the account is required to pay in a minimum of £1,000 each month to maintain the rate. And after just twelve months Nationwide actually decreases the interest to just 1%.
Nationwide offer a “refer a friend scheme” which nets both you and your friend a £100 bonus if they switch as well. You can refer up to 10 friends per year, earning you a nice £1,000 bonus if you’re a persuasive type. The account offers an interest-free overdraft for 12 months (reverts to 50p per day for the overdraft after 12 months).
The Santander 123 account offers 1.5% interest on balances of up to and including £20,000 making it an attractive option for bigger savers. The account offers cashback of 3% on bills such as your mobile phone, broadband, digital TV package and home phone, 2% on home energy bills, 1% on home water, 1% on council tax & 1% on mortgages with Santander. To qualify for this and the interest rates you must pay in at least £500 per month and have 2 active, monthly direct debits on your account.
Best Account For Cashback
Natwest Cashback Account
If you are more interested in cashback than earning interest on savings then Natwest’s Cashback Account could be a good option for you. The account has a £2 monthly fee but offers 2% cashback on a range of household bills including council tax, utilities, TV, phone and broadband. You need to spend at least £100 on these household bills to benefit from this account.
If you live in Scotland you can get the same deal from The Royal Bank of Scotland.
Halifax Multi-Reward Current Account
To bank with Halifax and benefit from a range of added-value options, you’ll have to accept the fact that you won't receive any interest at all on your current account. Instead, Halifax has provided a number of extras for banking with it, including home emergency cover, travel insurance, mobile phone cover, AA breakdown cover and a range of cashback opportunities for certain purchases, up to 15%. However, it costs you a whopping £15 per month to maintain the account, unless you are able to deposit at least £750 each month and run two active direct debits from the service. If you can do this, your monthly payment reduces to £12 each month. However, it does offer customers a £75 switching incentive to encourage people to sign up.
Santander 123 Lite
The new Santander 123 Lite Account offers cashback on household bills in return for a £1 per month fee and no interest on your savings. The account offers cashback of 3% on bills such as your mobile phone, broadband, digital TV package and home phone, 2% on home energy bills, 1% on home water, 1% on council tax and 1% on mortgages with Santander. To qualify for this and the interest rates you must pay in at least £500 per month and have 2 active, monthly direct debits on your account.
Should you be switching current accounts right now?
This reluctance to undertake market comparison means that even for high earners, many of us are not reaping the various incentives and rewards available through sensible comparison of current accounts. There are a good number of positive deals out there for people prepared to shop around and select the best current account to meet their individual financial circumstances and requirements. A simple online comparison will show the best deals out there at the moment and will provide details about the incentives the leading banks offer in order to persuade customers to make the change. Switching is painless, and you could reap significant rewards in terms of interest rates, perks and enhanced benefits.