Banking News

The current account sector had largely fallen off the radar in recent months, with many providers cutting their switching incentives, perks and interest rates amid lacklustre competition. However, a slight boost in activity this week suggests that the tide could be starting to turn, with two providers enhancing their cash offers to customers…

NatWest launches its highest ever switching offer

Earlier this week, NatWest launched its latest switching incentive, with it now offering £175 to both new and existing customers who switch their main bank account. This includes £125 after the first few months and an additional £50 after the first year, with the bank saying it's the highest switching incentive it's ever offered.

There could be several extra perks for customers to enjoy, too, with those switching to the NatWest Reward current account able to earn 2% cashback on household bills as well as additional rewards and incentives, while those opting for the Reward Silver, Platinum or Premier Reward accounts can benefit from extra perks such as travel insurance and 40% off cinema tickets (monthly fees and minimum income requirements may apply).

To qualify for the switching incentive, customers will need to use the Current Account Switch Service and close their existing account, thereby transferring their main current account to NatWest. They'll also need to pay in at least £1,500 and will need to log in to online or mobile banking before 12 July. It's also worth pointing out that this is a time-limited offer – the deal is available now and runs until 7 June, so if you're thinking about switching, you may want to do so in the next couple of months to benefit from the cash bonus.

TSB launches refer a friend scheme

TSB has made a couple of changes to its popular Classic Plus Current Account, and while one of them won't be quite so welcome, the other could still give customers the chance to earn something extra.

First up, the bank is launching a 'refer a friend' scheme, whereby current account customers can earn £75 for every friend they refer who subsequently switches to TSB, and the friend will also receive £75. Existing customers can refer up to five friends, giving them the chance to earn up to £375, with the promotion running until 30 June.

The next change isn't quite so promising, with TSB announcing that it's reducing the rate of interest on the account from 5% AER to 3% on balances of up to £1,500 from 2 July. This will come as quite a blow to customers who may be using the account as a place to stash some of their savings, though the bank says it still offers one of the best interest deals on the market.

"It's disappointing news that TSB will be dropping its lucrative credit interest rate by 2% in July, especially as it increased the rate last year after its IT systems caused chaos for customers," said Rachel Springall, finance expert at Moneyfacts.co.uk. "While the recommend a friend offer is a nice sweetener, some friends may be reluctant to switch to TSB; however, the current account is still a decent offer and it should be considered against the rest of the competition."

What else can you get?

If neither of the above accounts work for you but you still want to benefit from a decent switching incentive or in-credit interest rate, Rachel has a few recommendations:

"Thankfully, customers can still earn 5% elsewhere, such as with Nationwide's FlexDirect that pays 5% AER for the first 12 months on balances up to £2,500, and customers will just need to pay in £1,000 a month. Nationwide still offers its recommend a friend incentive, too, where customers can share £200 with friends if they switch their main current account; currently, they could earn up to £500 per year by recommending five friends.

"Elsewhere, those who switch to M&S Bank will get up to £180 in a gift card, including £100 upfront and a further £80 after 12 months, and first direct will pay £100 upfront for those who switch to their 1^st Account. Halifax also has an offer for switches, as they will pay £50 when they switch and a further £85 after six months, provided customers pay in at least £1,500 per month, go paper-free and use their debit card.

"However, as with any current account, customers would be wise to consider all the benefits of the account, including the overdraft rate, and not be swayed by just an upfront free perk."

Challenger banks have been making headlines this week, with RCI Bank revealing it's just received its UK banking licence and OneSavings Bank announcing its planned merger with Charter Court.

All change

The fact that RCI Bank has been granted its UK banking licence means that, from today, the bank is covered by the Financial Services Compensation Scheme (FSCS), the UK's deposit guarantee scheme, whereas previously it was under FGDR/French regulation. This provides more peace of mind to savers as their deposits (of up to £85,000 per person per banking licence) are now protected by a UK scheme in the event of the bank's insolvency.

RCI Bank already holds a prominent position in our easy access Best Buys. Its online-only Freedom Savings Account pays a highly competitive variable rate of 1.42% yearly from a minimum investment of £100, with no restrictions on additions or withdrawals, and the latest news is set to propel its popularity even further.

Meanwhile, the proposed merger between OneSavings Bank and Charter Court is set to cause a storm in the finance industry, with it expected to create a £1.6bn competitor. Both banks currently focus on savings and specialist mortgages, with the merger good news for consumers, as it could lead to more competitive rates in the savings and mortgage charts.

Challenger boost

In recent years there has been a growing number of new banks entering the UK market, creating more choice for consumers and, arguably, better rates, particularly in the savings sector. Indeed, towards the end of last year the US banking giant Goldman Sachs entered the UK savings market, with its consumer brand Marcus by Goldman Sachs® offering an easy access saving rate of 1.50% AER that still dominates the Moneyfacts.co.uk Best Buy chart.

The growth of challengers has been in part down to the restrictions on finance providers entering the UK market being relaxed, which has seen a boom in challenger banks over the last decade. For consumers, this has created a more competitive market as challenger banks regularly top the Best Buys, typically offering the best rates and often far outperforming well-known high street banks. In addition to this, many Islamic banks have also been entering the UK market in recent years and making an impact by not only providing competitive expected profits on savings, but also offering savers with an ethical investment option.

What next?

Take a look at the best savings deals available and you'll soon see that the charts are dominated by challengers. There's nothing to fear from these new arrivals; they come with the same financial protection as their better-known counterparts, so could be the ideal choice for those seeking the highest possible rates. Find out more about challenger and Islamic banks, and check out our savings Best Buys to find the right deal for you.

Customers searching for a new current account will find that there are now more ways to compare not just the best deals available, but also the service and quality of some of the biggest account providers on the market.

This is thanks to the GfK UK Limited service quality recommendation survey, an independent survey that's to be published every six months as part of a new regulatory requirement from the Financial Conduct Authority and the Competition and Markets Authority (CMA). The latest figures indicate that providers with a high overall service quality score for personal current accounts are gaining customers, while those that scored less have seen consumers switch from their service.

To help you decide which accounts could be right for you, Moneyfacts.co.uk has highlighted those providers that offer some of the best current accounts on the market, along with their overall service quality score.

*£5 monthly fee. **£10 monthly fee unless account funded by £1,000 or if an existing relationship is held. Fee waived for the first six months. Source: Moneyfacts.co.uk

"The latest shake-up in the current account market is designed to help customers make better-informed decisions when eyeing up an alternative deal, and it already seems as though consumers are becoming more aware that the level of service they receive is just as important as an account's incentive package," said Rachel Springall, finance expert at Moneyfacts.co.uk. "Not only this, but switching between providers is simpler than ever before thanks to the Current Account Switch Service (CASS), which means customers can switch current accounts in as few as seven days."

There's a definite correlation between those brands that offer the highest service quality score and those that are gaining the highest number of new customers, too, as evidenced by the latest switching figures from the CASS dashboard.

For example, "Nationwide made a net gain of over 30,000 switches between July and September 2018 and, based on the independent study by GfK UK Limited, the bank came out with a 72% satisfaction rate for overall service quality, taking third place in the rankings of 16 of the biggest current account providers on the market," pointed out Rachel. "The FlexDirect account from Nationwide remains one of the top deals for consumers searching for high credit interest, paying 5% AER, so it's little wonder the mutual is so attractive to many consumers.

"Conversely, some of the providers to suffer the biggest net losses over the same period were those who failed to achieve an overall service quality rating of 60% or more, such as TSB (52% score) and NatWest (59%). Both of these brands faced criticism over IT glitches, the result being that TSB saw a net loss of over 16,000 switches, while NatWest lost more than 12,000 customers. It therefore seems likely this disruption to service – which resulted in a poor customer service score – led to users looking to other providers to bank with."

It looks as though the link between the quality of service and movement of customers may well be set to continue, and now that service recommendations are an industry requirement, it is anticipated that more consumers will consider these results before they switch. Handily, you can now find details of each brand's service performance when comparing current accounts – simply click on the 'Details' link of your potential new account and you'll find the most recent performance figures, alongside all other necessary product details.

"As the market continues to adapt, it can only be a positive result for consumers who feel that their loyalty isn't paying off," concluded Rachel. "It takes just seven days to switch using the CASS and there are some great deals to take advantage of whether customers are a saver or a spender."

The start of a new year can herald a new beginning for people's finances, with the excess of the festive period inspiring many to take a closer look at their outgoings – and some consumers inevitably consider moving their current account in the process. Given that cash perks and switching incentives are returning to the banking sector, now could be a great time to do it!

Current accounts can be easily overlooked, with some consumers feeling it would be too much of a hassle to switch – but they could miss out on free cash or a nice monthly perk because of this. Indeed, current account providers have been upping their game recently, with the table below highlighting some of the best deals on offer today, compared to the perks available this time last year.

Upfront switching incentives on current accounts

*Existing M&S credit card customers can get up to £220 when they switch and stay. Source: Moneyfacts.co.uk

"A new year can also bring a new attitude when it comes to finances, and starting afresh with a new current account could be a consideration for many consumers," said Rachel Springall, finance expert at Moneyfacts.co.uk. "Coincidently, January tends to be a popular time for providers to launch tempting free cash incentives to entice consumers to switch."

However, Rachel points out that, "while any free cash perk is tempting, customers looking to move their current account must be sure that a short-term financial incentive isn't the sole reason for leaving their existing provider, as the new account may be more expensive for dipping into an overdraft or it may not pay any credit interest, for example." This is why it's so important to compare the finer details of any account thoroughly before making the switch, taking factors such as overdraft fees and credit interest into account.

Then there are things like customer service and access to the account, which could prove to be key motivations for switching. Many consumers seem to be taking the plunge, too, with 5.1 million switches having been made since the Current Account Switch Service (CASS) launched in 2013.

The importance of customer service and perks such as in-credit interest are highlighted when looking at the most recent CASS figures, covering the period 1 July 2018 to 30 September 2018. These show that Nationwide Building Society – whose FlexDirect account pays an in-credit interest rate of 5% on balances of up to £2,500 – recorded a net gain of over 34,000 full account switches, whereas TSB made a net loss of almost 17,000, arguably due to the IT meltdown that plagued the bank earlier in the year.

At the same time, challenger banks like Starling Bank are gaining new customers, with straightforward fuss-free alternatives to traditional banking – in this instance, digital, mobile-only banking – proving to be a tempting offer for many consumers.

"Not only do providers offer financial incentives to attract customers, but accounts such as Santander's 123 Current Account pay monthly interest and cashback on spending for a £5 per month fee," said Rachel. "Whether customers are able to benefit from these types of incentives will depend on their day-to-day spending, so it would be wise to consider how an account is used and whether this type of perk best suits their individual needs.

"2019 is set to be another interesting year for consumers looking to change their spending habits, as it is hoped they will have a clearer view of their financial circumstances to help them make a decision to switch."

What next?

Thinking of switching your current account? Check out the top deals currently available to see how you could benefit.