Yahoo Finance Can you still make money by switching current accounts?
The brief current account switching bonus drought has ended, with the launch of two new deals. It’s great news for those whose banks are falling short, who fancy making over £100 without too much effort. It’s also a positive sign that these deals aren’t set to vanish overnight, something that was far more likely when there was only one deal left on the market.
Switching current accounts has been a nice little earner for the past year, with a host of banks offering generous cash bonuses if you’re prepared to make a move. However, in recent months, most of these deals have been quietly withdrawn. After Nationwide (NBS.L) axed its bonus in December, it left First Direct as the lone outlier, paying £175 for a switch.
One reason some of the banks will have withdrawn is that the market is expecting interest rates to fall. At the moment, they’re more confident of a drop than the economists at the Bank of England, and are factoring in cuts from as early as May – and several more as we go through the rest of the year. In an environment of falling rates, customers are less valuable to banks, so they’re less willing to pay to get them on board.
There was a real concern that this would drive banks away from switching bonuses, but after a New Year reset, two of them decided that attracting current account customers was a priority – and worth spending a bit of money on. They’ve both introduced small print, however, to make sure those accounts are used in a way that suits them - and they both offer a smaller base switching bonus, and then boost it with another lump sum if you behave in the way they want you to.
TSB wants you to use the account as your main current account – rather than having it as a separate secondary account for the sake of the bonus. It also wants you to operate it online as much as possible. That way you are a captive audience for it to sell products to, without relying on the dwindling branch network. To get you to do this, it has brought in a £125 reward, which you only get if you go through the full switching service, have two direct debits coming from the account, spend on the debit card at least once by 15 March, and log into the mobile banking app. The bonus will be paid by 29 March. As an extra inventive, you’ll get £10 a month cashback if you spend on the debit card 20 times a month for the first six months, firmly cementing you as a customer.
The Co-op bank wants to make you use this as your main current account, to use it mainly online, and then pull you into using a number of its products from day one. To do this, you’ll get £100 for switching, with very similar rules to TSB. You need to use the current account switching service, and have at least two direct debits. You also need to spend on the debit card five times and register for online banking. You’ll get an extra £50 for putting at least £25 into a linked savings account within 25 days of making the switch. It’s going to hope you decide that once you have the savings account, you may as well use it for short-term savings goals.
You can pick from two savings accounts. The Online Saver offers 2.65%, which isn’t bad for a high street bank, but is way short of the best on the market. The Base Rate Tracker, meanwhile, offers tiered rates, depending on how much you put in. This is designed to encourage you to put more with the bank. If you have £10,000, you’ll make 2.5% below the Bank of England base rate (currently 5.25%). If rates fall as expected, this will be on the way down.
These join what was the stalwart of the market, First Direct. This is still the most generous deal, and has the least small print. You have to open the account using the app, use the current account switching service, and pay in £1,000 within three months. You’ll then get the £175 after 28 days of meeting the criteria. If you do want to save, having a current account gives you access to a regular saver paying 7%. The only headache with this account is that to qualify for the money, you can’t have had a First Direct product before, or opened an HSBC current account since the start of 2020.
All of these bonuses offer money for nothing, which is a great financial boost at a time when so many people are spending down to their last penny every month. They’ll also help persuade people to switch away from banks that are letting them down. A switching deal shouldn’t sway the balance, because the bonus is going to be scant consolation if you end up with an account that doesn’t meet your needs However, it’s a great reason to convince people it’s worth shopping around, and leaving the shackles of their current bank.
Sarah Coles is a personal finance analyst at Hargreaves Lansdown and co-presents Switch Your Money On podcast.
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