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Top rates… but there’s a catch
Banks and building societies offer a variety of incentives to switch your business to them, from welcome bonuses to overdrafts to credit interest rates. Indeed, some of those interest rates thrash the best savings rates right now.
The arrival of the seven-day switch has only heightened that competition for business. There’s also one other major way they are trying to entice us and that’s through offering market-leading rates to existing customers.
Let’s take a look at what’s on offer.
Personal loans
When it comes to personal loans a fair few lenders will only offer their best rates to existing current account customers.
In the mid-size personal loan market for loans of between £7,500 and £15,000 five of the best 15 rates come with this restriction.
Here are the best buys for a loan of £10,000 repaid over five years.
Loan | Representative APR | Total amount repayable |
4.6% | £11,200.20 | |
Clydesdale Bank Personal Loan | 4.6% | £11,200.20 |
Yorkshire Bank Personal Loan | 4.6% | £11,200.20 |
4.7% | £11,213.40 | |
4.7% | £11,213.40 | |
Sainsbury’s Non-Shopper Standard Loan | 4.7% | £11,213.40 |
HSBC Personal Loan** | 4.8% | £11,239.80 |
4.8% | £11,239.80 | |
4.8% | £11,239.80 | |
AA Member Personal Loan | 4.8% | £11,239.80 |
*M&S Bank customers only
**HSBC current account holders only
Clydesdale and Yorkshire Bank have just taken joint top spot in the mid-size personal loan market with Sainsbury's Bank with a representative APR of 4.6% for loans of between £7,500 and £15,000. This offer is open to both new and existing customers.
Note that as it’s a representative rate, it only has to be offered to 51% of applicants. The rate you’ll actually get very much depends on your credit rating.
The next best rate of 4.7% on offer with the M&S Bank Cardholder Personal Loan is only available to people who already have an M&S credit card, storecard or current account. Those without are offered a slightly higher rate of 4.8%.
For larger amounts between £15,000 and £25,000, the trend is even more prevalent. The top four rates are reserved for current account customers only.
Here are the best buys for a £17,500 loan repaid over five years.
Loan | Representative APR | Total amount repayable |
First Direct Existing Customer* | 5.1% | £19,825.74 |
Barclays Barclayloan** | 5.9% | £20,176 |
Lloyds Bank Personal Loan*** | 6.4% | £20,406.83 |
Bank of Scotland Personal Loan*** | 6.4% | £20,406.83 |
TSB Personal Loan*** | 6.4% | £20,406.83 |
6.6% | £20,499.60 | |
Yorkshire Bank Online Personal Loan | 6.6% | £20,499.60 |
Clydesdale Bank Online Personal Loan | 6.6% | £20,499.60 |
£20,545.80 | ||
HSBC Personal Loan***** | 6.7% | £20,545.80 |
6.7% | £20,567.40 |
*First Direct 1st account customers only
**Barclays current account customers who've held an account for at least nine months and paid in at least £1,000 a month only
***Lloyds Bank/Bank of Scotland/TSB current account customers only
****M&S Bank customers only
*****HSBC current account holders only
First Direct is offering a rate of 5.1%, which is a massive reduction compared to the next best rates. You need to have a 1st current account to get this rate, but this is one of the top accounts, certainly in terms of customer service, so it could well be worth switching. You’ll also receive a £100 welcome bonus for switching.
The next best rate is also only available to existing customers and comes from Barclays. You need to have held a Barclays current account for at least nine months and have paid in at least £1,000 a month to be in with a chance of qualifying for a rate of 5.9%.
Credit cards
There are a couple of credit cards that are only open to bank or building society customers that are arguably the equal if not better to those that are open to all.
The Nationwide Select Credit Card doesn't charge fees for foreign use and also pays 0.5% cashback on purchases. For a limited period new applicants can earn 2% in the first 90 days with the card and 0.5% thereafter. The card also offers 0% on balance transfer for 26 months and interest-free purchases for 15 months to boot. So it's a decent all-rounder if you only want to carry one card. Select is only open to Nationwide FlexAccount, FlexDirect and FlexPlus current account customers.
The Santander 123 credit card is one of the best cashback cards out there, paying 1% cashback on supermarket shopping and Amazon.co.uk (the latter for a limited period), 2% at department stores and 3% at petrol stations, and on National Rail and Transport for London purchases. If you have a Santander 123 current account, which also pays cashback on some Direct Debits and interest on balances up to £20,000, your 123 credit card is free of its £24 annual fee for the first year.
[Price war on 0% credit cards]
Savings
First Direct’s Regular Saver pays a whopping 6% to customers of its 1st Account.
Similarly, HSBC’s Regular Saver pays 6% to customers of its fee-paying current accounts and 4% to Bank Account, Bank Account Pay Monthly and Graduate Bank Account customers.
Norwich & Peterborough Building Society also pays 4% on its regular Gold Savings account, but you need to be a Gold Classic Current Account customer already and pay in at least £500 a month during the 12-month savings period.
[Best savings accounts and ISAs to start 2014]
Junior ISAs
Arguably the most well-known cash Junior ISA is Halifax’s, which pays 6% if you hold an adult Cash ISA with Halifax as well or the child is aged 16-18.
Mortgages
Already being a current account customer can be advantageous when it comes to getting a mortgage offer, as you have a financial track record your bank or building society can look at.
Most banks and building societies offer special mortgage rates for their banking customers, although these are usually not the most competitive on the market. They also may offer mortgages with cheaper fees, so it's always worth asking what's on offer when you're shopping around.
