You’d be forgiven for thinking banks don’t want customers – savings rates are pitiful and it seems easier to get an Olympic gold than a mortgage these days. But banks are falling over themselves to win new current-account customers. The reason is that once they have us as a current-account customer they know most of us are too lazy to switch and will also get other financial products from them, such as loans and credit cards.
Make the most of this one area of banking generosity and bag a rewarding current account. HSBC is currently offering new customers £200 if they switch to its Advance account. You have to set up at least two direct debits or standing orders and switch using the official Current Account Switching Service to receive the first £150. Then register for mobile or online banking and after 12 months you’ll get the other £50.
The Advance account isn’t dazzling – it doesn’t pay interest if you’re in credit – but customers can open a linked regular savings account paying 5% interest. The current account also has an interest-free overdraft for the first six months, but dip into an unauthorised overdraft and you’ll pay £5 a day. You also have to pay in at least £1,750 a month.
If you keep a lot of money in your current account, you would be better off opening Santander’s 123 account. It pays 1.5% monthly interest on balances up to £20,000, so after fees you could earn up to £238 a year. You’ll also earn cashback on your bill payments. Another alternative is Halifax’s Reward Account. Switch at the moment and you’ll get a £100 bonus. Moreover, if you pay in £750 a month, stay in credit and set up two direct debits, you’ll earn a £5 monthly reward.
There is no limit on how many current accounts you can have, though you may want to avoid opening lots of new accounts if you’re about to apply for a mortgage or other credit, as having several recent credit searches on your file can be a warning sign for lenders. So if you have the time, patience and money to take advantage of all three providers’ offers, you could pocket almost £600 in a year in interest and bonuses.
Where to put your savings
Many banks also reward their current-account customers with attractive rates on linked regular savings accounts. If you are looking to build a nest egg steadily, these can be a good way of doing so.
HSBC’s Advance account comes with a linked regular savings account paying 5%. You can deposit between £25 and £250, and if you don’t deposit the full £250 in any month you can carry over the remaining allowance. So there is the potential to earn up to £82 over the year. The catch is that if you miss a payment or make a withdrawal, HSBC will close the account and only pay you 0.05% interest.
First Direct also offers current-account customers a regular savings account paying 5%. This allows slightly higher monthly deposits of between £25 and £300 and you can carry over an unused allowance to another month. This means you could earn up to £97 interest. As with the HSBC account though, if you miss a payment or make a withdrawal the account will be closed and the interest rate will fall to 0.05%.
M&S Bank also offers a 5% regular saver with deposits of £25 to £250 a month, and the option to carry over unused monthly allowances. If you make a withdrawal you must close the account and your interest rate will drop to 0.75% (0.5% from 18 October).
If you want to be able to access the cash in a hurry, then Nationwide has a great option. Current-account customers can open a regular saver paying 5% on deposits of between £1 and £500. This account allows you to miss months (but not carry over allowances) and you can make unlimited withdrawals.