THE UK’s high street banks have launched a wave of cash incentives in a bid to attract new current account customers.
But consumers have been told to look behind the bribes or risk being left out of pocket by moving to accounts that later hammer them with charges.
Co-operative Bank and Nationwide Building Society joined the battle to secure new current account customers this week by launching switching sweeteners.
The latest raft of cash offers comes months after the introduction of a new seven-day switching service, which guarantees that account transfers will take no longer than seven working days and helped drive a 17 per cent increase in current account switching in the last three months of 2013.
People switching to the Co-operative Standard Current Account or Current Account Plus, or to the smile Current Account, will get a £100 lump sum and £25 to donate to one of seven selected charities, provided they pay in £800 within 31 days.
Existing current account customers who don’t currently pay in £800 a month will also be eligible for the £100 payment if they complete a switch and credit £800 within 31 days.
The Co-op was rocked last year by the collapse of a deal to buy 631 Lloyds branches, before scandal erupted over the behaviour of then-chairman Paul Flowers. The bank is now largely owned by US hedge funds after a bail-out by bondholders.
Its long-standing image as the ethical high street bank had enabled it benefit from a surge of new business in the wake of the banking crisis. That process was partly reversed last year as it suffered an exodus of customers.
The “golden hello” deal launched this week is a bid to arrest that slide, according to Andrew Hagger, of Moneycomms.
“There’s a long way to go if Co-op Bank is to regain trust and repair its reputation but this could be the first small step in the rebuilding process. What it will do is deliver some welcome competition in a market in which there is a very short supply when it comes to decent customer service.”
Nationwide Building Society’s new switching deal is a “refer a friend” service. Where someone switches their main account to the mutual on the recommendation of an existing Nationwide customer, both parties will receive £50. With existing Nationwide current account customers allowed to recommend up to ten friends a year there is up to an annual £500 on offer.
Among the other cash deals available on current account switching are the £100 joining incentives from both First Direct and the Halifax.
The latter comes following the return of the Halifax to Scotland’s high street for the first time in a decade as it touts itself as a “challenger” bank. But there is no switching incentive on current accounts at fellow-Lloyds Banking Group brand Bank of Scotland, nor at the Royal Bank of Scotland.
But the battle for current account business comes with its risks for those tempted by the various “golden hello” payments. While cash sums are alluring, especially when times are tough, picking the wrong current account for the wrong reason can prove a costly mistake in the long run.
Hagger warned current account users to focus on core product features, such as overdraft charges, credit interest and overseas usage fees, and not be swayed by upfront offers.
“Choosing the wrong deal can more than wipe out the initial benefit, so take those pound signs from your eyes and check out the rates fees and charges before you rush to move your bank account,” he said.
And those charges can mount up rapidly for the millions who are regularly in the red.
Almost three in ten people have paid bank fees over the past 12 months, including two-thirds who were charged for authorised overdrafts, according to new research by Thinkmoney.
It revealed that almost one million bank customers have paid more than £200 in bank charges in the last year, with penalties for bounced direct debits or cheques among the costs pushing many people into unauthorised overdrafts.