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Make the most of the current account storm

Make the most of the current account storm

Category: Banking

Updated: 25/04/2016
First Published: 25/04/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

In previous years banking customers have had little incentive to switch their current account, but since the launch of the Current Account Switch Guarantee in 2013, almost three million people have ditched their old account to move on to pastures new. As a result, a veritable current account storm has been created as providers compete to attract new customers, and you can take advantage!

Getting in on the action

Banks and building societies have been increasingly keen to take a slice of the switching action by offering lucrative rewards and cash incentives to entice new customers, and it could well pay off. These deals have grown in size over the last three years, and our research shows that some accounts now offer cash rewards of up to £220 in the first year! More current accounts are also offering attractive interest rates for savers, too, an appealing feature in a time when savings rates are locked in a continuous freefall.

Take a look at the table below to see some of the top accounts available, together with the kind of rewards and incentives they offer, and you'll soon see why so many consumers are taking the plunge and switching:

Selection of providers with cash incentives Type of reward gained (cashback on switching / spending per month) Cash earned in 1st year Equivalent interest rate (based on £2,000)
M&S Bank Current Account £100 (gift card) + an additional £10pm (a) (gift card) = £120pa £220 11.00%
Halifax Reward Current Account £100 (switch) + £5pm = £60pa £160 8.00%
first direct 1st Account £100 (switch) £100 5.00%
The Co-operative Bank Current Account Up to £4pm + £1.50pm on debit card spending = £66pa £66 3.30%
Barclays Bank Account Blue Rewards £4pm (b) = £48pa £48 2.40%
(a) Dependent on minimum funding of account.
(b) Cash received after monthly fee of £3 taken – more rewards available if certain Barclays products are held.
Compiled: 25.04.16

Win-win situation…

So, with rewards like that on offer, what have you got to lose? "It's fantastic that millions of people have mustered the courage to switch their old current account in favour of something more cost-effective," said Rachel Springall, finance expert at Moneyfacts. "Customers really can get something for nothing if they choose an account with a cash reward, so it's unsurprising that they are attracting interest.

"Indeed, in the last three months alone, Santander has gained over 50,000 switchers with its lucrative 123 Current Account, which offers up to 3% credit interest as well as cashback, offering the best of both worlds."

… if you're savvy

However, that's not to say that one of these accounts will be right for you. As Rachel points out, it's important to check your spending habits before you commit to a new account in order to ensure that it meets all your needs, and pay particular attention to fees.

"Over 90% of typical day-to-day current accounts charge fees of some kind, which could outweigh any rewards or interest," she says. "For instance, new customers of the 123 Current Account need to check that they can earn enough cashback and interest to warrant paying the £5 monthly usage fee, [and] should also carefully check the accompanying overdraft fees if they regularly become overdrawn."

It's hoped that there will be a crackdown on excessive fees by the Competition and Markets Authority (CMA), but in the meantime it's important to assess the current account in its entirety, rather than be swayed by the headline offer.

That said, if you've taken a look at the small print of the account and are confident it'll work for you, there's every chance you could benefit. But, you'll need to be quick if you want to make the most of the deals currently on offer – HSBC, Clydesdale Bank and Yorkshire Bank recently withdrew their cash incentives, while Halifax and first direct reduced the amount they pay, so if you want to take advantage, act fast!

What next?

Check out our pick of the top current accounts on the market, and see if you can make the most of things.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.