Halifax is offering potential new current account customers £100 before they have even switched.
Halifax has upped then ante on the battle to win new current account customers, by offering to pay £100 before they even switch accounts.
These switcher deals are not new: Halifax, Santander, Co-operative Bank and even First Direct have offered up to £300 to customers switching their primary current account. But this money has only been paid once the account has been switched – a process which can take up to six weeks.
Halifax is hoping customers whose finances have been stretched by the festive season will be more likely to take up its offer, as the money is paid on day one of this switching process.
Meanwhile, the Co-operative Bank – another bank trying to compete against the “Big Four” -announced it is freezing overdraft charges for existing customers for the next three months.
Currently the vast majority of current account remain with Lloyds TSB, NatWest, HSBC and Barclays. But as the “preferred bidder”, the Co-operative Bank looks likely to take over more than 600 Lloyds branches later this year.
Andrew Hagger of Moneynet.co.uk said: “Clearly these cash incentives do motivate some people to switch their current account. But it is important to look at more than just the cash payments being made.”
He said Halifax’s main “Reward” current account was attractive for those who don’t use an overdraft. This account pays £5 a month credit interest – regardless of the amount held on deposit. This makes it particularly attractive for those who keep relatively low sums in their current account.
The average credit interest paid on current accounts is just 0.78pc.
However he said the daily overdraft charges make this an uncompetitive account for those who regularly dip into the red. Halifax charges a £1 daily overdraft fee, rather than an interest rate. As there is no maximum monthly fee, this can be an expensive way to borrow for those who spend much of the month overdrawn.
Kevin Mountford of Moneysupermarket.com added: “Halifax says that 200,000 people used its switcher service last year. But over all the numbers of people moving bank account remain relatively low.”
He said these incentives did encourage people to move, but often it was poor service from their existing bank that pushed them to seek a new provider instead.
He added: “Customers should always research current accounts carefully and make sure the account is suitable for them. In many cases the switching process is now a lot easier and quicker for consumers, but many are still wary about switching.”
Mr Hagger welcomed the move by the Co-op and said it was “refreshing” to see a bank reward its existing customers rather than reserving the best deals for new customers.
Halifax is offering its £100 incentive until 19 February. Meanwhile Santander is offering up to £300 to those who switch accounts to the bank. However, to qualify for this maximum payment, customers already need to have a Santander mortgage or savings account.
First Direct – voted best bank for customer service in consumer surveys – is also offering customers £100 to switch, and if you’re not happy with the bank after six months and move again, it will also pay a further £100.
*reported by telegraph.co.uk*