High street banks are upping their incentives for people to switch their current account with incentives going as high as £175.
With the cost of living crisis pushing UK households to find ways to make and save money, lenders are fighting amongst each other to offer the most generous incentive to make customers switch their current accounts.
First Direct boosted its usual incentive of £150 by an additional £25, meaning that it will offer customers free cash to the sum of £175 if they switch their current account using the Current Account Switch Service (CASS).
The cash will be transferred to your account within 28 days, assuming you meet a certain criteria. This includes being a first time client and paying in at least £1,000 within the first three months of opening the account.
Santander (SAN) this Tuesday announced it was matching this amount, by launching a new £175 switcher cashback offer for both new and existing customers of its 1|2|3 accounts.
The lender is also offering 1|2|3 customers double cashback on their gas and electricity bills for two months from September.
Santander, which is home to 5.4m UK customers, had been offering a £160 cashback incentive that could help switchers to weather the cost of living storm.
Customers will need to complete the switch within 60 days, deposit at least £1,000, set up two active direct debits and log in to online or mobile banking.
The cashback will be paid directly into their qualifying Santander current account within 30 days following this.
“Competition for switchers has heightened since the end of the pandemic lockdowns, and we’re now regularly seeing cash bonuses of £150+ from the incumbent banks,” Michelle Stevens, deputy editor and banking specialist at the personal finance comparison site, finder.com, said.
“This is because they seek to compete not only with other high street banks but also with the UK’s digital challenger banks – who in recent years have been able to lure away current account customers from high street banking providers without the need to offer any cash switching incentives,” she added.
Virgin Money (VMUK.L) this week launched a new bank account switching incentive, giving those who sign up the ability to earn 25% cashback on supermarket and fuel spending for 60 days, up to a maximum of £160.
Virgin's cashback can be earned by spending at any UK supermarket, including Asda, Marks & Spencer, Morrisons, Sainsbury’s, Aldi, Lidl, Tesco, Iceland, The Co-operative and Waitrose, as well as any UK petrol station.
“Interestingly, HSBC (HSBA.L) and its sister bank first direct recorded the second highest net loss (14,875) of current account customers in Q4 2021, and both banks have introduced £175 switching bonuses during 2022,” Stevens, said.
“This tactic may be starting to pay off, as the banks gained 5,176 current account customers in Q1 2022. Santander lost 3,052 current account holders in Q1 2022, so it may be hoping that its new chart-topping switching deal will also have the same effect. Existing banking customers could be more inclined to move their current account now, as the cost of living crisis is forcing people to evaluate every part of their finances, whether that be cancelling unused subscriptions or identifying ways to make money for using everyday services, including getting paid a cash bonus to switch their bank account,” she added.
New and existing customers who switch to the Halifax Reward Current Account can also get a free £150. For those joining Nationwide it is up to £125.
“The £150+ deals can be very tempting, especially if the account you switch to also has other benefits on offer, such as paying cashback on bills,” Stevens said.
Despite rising interest rates, banks have been slow to increase the amount they pay savers, with the average easy-access savings account offering only 0.7%, according to Moneyfacts.
Watch: How to prevent getting into debt