Current account sweeteners that can turn sour

The rise in the number of people switching current accounts means banks are working harder than ever to attract – and retain – your business, with many offering fantastic perks for switchers or savers. However, these perks are starting to dwindle, so if you failed to grab a top deal last year, you may be disappointed to know that some are being clawed back.

Not so sweet

The Current Account Switch Service is well established, yet that hasn't stopped providers from refreshing their ranges, with our latest research revealing that cash switching incentives – which can be a big enticement to switch – are being dramatically cut.

Indeed, comparing what's on offer today with last year's deals reveals that first direct, Halifax, M&S Bank and The Co-operative Bank have all reduced the amount they offer in upfront cash for switchers, while Smile and Clydesdale/Yorkshire Bank have removed their £150 upfront cash incentive entirely.

Not only that, but analysis reveals that using the overdraft facility on some of these accounts over a long period can turn upfront cash sweeteners quite sour, so those seemingly lucrative perks could end up being anything but. The table below highlights some of the top current accounts that offer incentives, together with how those incentives have changed in recent months, and how much an overdraft could override the benefits.

Consider your options

However, that's not to say that you shouldn't consider switching account. After all, there are still some good deals out there, and some – such as HSBC's – will still result in a decent profit even after dipping into the red each month. Current account switching could soon be made even easier, too, so if you're not happy with your current deal (or simply want a bit of a cash injection) there's nothing stopping you!

Just make sure you choose wisely, as Rachel Springall, finance expert at Moneyfacts, explains: "While it's disappointing that there is less cash on offer compared to last year, this shouldn't discourage consumers from considering a switch if they are on a poor deal. However, consumers can only be certain of choosing the right current account if they assess the overall package, which can be time consuming.

"Those who choose rashly could easily be handing back their cash perk in overdraft fees if they dip into the red for an extended period, thanks to the inflated fees that some of these accounts charge. As an example, the £100 upfront cash with Halifax looks appealing, but use the account badly and the monthly overdraft fee can make you owe them £80 in charges."

This is why it's so important to check the small print thoroughly, particularly when it comes to overdrafts; if you think you'll be dipping into it regularly, it may be worth focusing your attention on an account that comes with low overdraft fees rather than being swayed by upfront incentives.

Alternatively, if you want to use your current account for your savings, you may be tempted to opt for a high interest variety, but here, too, there are some changes – and again, you'll want to make sure you use such an account wisely.

"Other perks are also being cut back, such as lucrative credit interest rates," said Rachel, "with Lloyds Bank, Santander and TSB having cut down their top interest rates in the last six months." Unfortunately, the same can't be said for the cost of borrowing, despite last year's base rate cut, as accounts that charge usage fees have been left untouched. Nonetheless, if you rarely dip into the red, a high interest current account could still be worth it – check out the top six to see if you can find one that appeals.

"Anyone who is still on the fence about switching their current account would be wise to consider switching soon, while the perks are still around," concluded Rachel, "but they should remember to tread carefully and choose an account that addresses all their financial requirements, otherwise that cash sweetener could easily turn sour."

What next?

Compare the top current accounts to see if it's time to switch