Alliance & Leicester (A&L), which along with Abbey is owned by the Santander group, has been offering new current account customers £100 since the start of the year, but the promotion will be withdrawn on April 2. The offer, which applies to its
Premier and
Premier 50 current accounts, is available to people who haven't held an A&L or Abbey account within the last three months.
The Premier Current Account pays 0.5% on balances up to £2,500 (the rate is 0.1% on anything above that). While the in-credit rate isn't the highest on the market this account does offer branch access - most of the highest-paying deals are online accounts. Premier account customers also have access to A&L's market-leading overdraft. It is interest-free for the first 12 months, after which you pay 50p for every day you're overdrawn up to a maximum of £5 a month. Customers also receive free annual European travel insurance. However, you must be aged 21 or over and pay in at least £500 a month in order to qualify for the account.
The other account the £100 switching incentive applies to is the Premier 50. This account, as its name suggests is only available to the over 50s. It pays 5.0% on balances up to £2,500 and this rate is fixed for the first 12 months. Thereafter, the rate drops to 1%. The 12-month interest-free overdraft applies to this account and customers also receive additional benefits including annual worldwide travel insurance, health benefits and identity protection. However, there is a £10 monthly fee so you need to weigh up whether the cost is worth the extra benefits.
So should we all be rushing to these deals to pocket a quick £100 or are there better accounts out there?
How good is the deal?
For many people the £100 switching incentive means that A&L's Premier account will offer the best value over the first year.
A&L's Premier Direct Account pays a higher rate of in-credit interest - you earn 5.0% on balances up to £2,500 for the first 12 months but in order to earn more than £100 over that time, you'd need to keep at least £2,000 in your account.
Abbey also has an account paying 5.0%. Its Preferred In-Credit account pays this rate for the first year on balances up to £2,500. However Abbey requires customers to pay at least £1,000 a month into the account, compared with A&L which has a £500 minimum monthly funding requirement. A&L's overdraft offering is also more competitive as it is free for the first 12-months and costs only 50p per day thereafter (up to the £5 monthly cap). Abbey by contrast charges its Preferred In-Credit customers an annual interest rate of 19.9%, although as its name suggests, this account is geared towards those who don't use an overdraft.
However, while these accounts offer good value over the first year, they are less competitive over the longer term. Another option worth considering therefore is the Halifax Reward Account. This is a relatively new offering, and rather than paying interest, customers have £5 per month - £60 a year - credited to their account. This is not just an introductory offer so extends beyond the first 12 months, although as with the Abbey deal, you must pay in at least £1,000 a month.
But if you're regularly overdrawn the Halifax Reward Account is unlikely to offer the best deal. As with A&L, Halifax charges its reward customers a daily rate for being in the red, albeit a higher one and there is no upper cap (A&L limits the amount you'll be charged to £5 per month). You will be charged £1 per day on overdrafts up to £2,500, rising to £2 per day above that amount - and that assumes your overdraft is authorised. If you go overdrawn without permission you'll pay £5 per day.
Another option if you keep a large amount of money in a current account, is the Lloyds TSB Classic Account with Vantage which allows customers to earn up to 4% on balances up to £7,000. However, bear in mind that there are catches with this deal as you only earn the 4% rate if your balance is between £5,000 and £7,000. Balances from £1-£999 earn 0.10%; those from £1,000 to £2,999 earn 2.0%; while balances from £3,000 to £4,999 pick up 3.0%. Also, the minimum monthly deposit is £1,000.
But isn't switching your current account complicated?
The majority of people have never changed current account and one of the main reasons for this that they assume it's too much hassle. But it needn't be.
Most current account providers have dedicated switching teams and your new bank will manage the process for you.
Once you've applied for an account, your new provider will contact your existing bank and ask for a list of all the direct debits and standing orders linked to the account. You then stipulate which mandates you want transferring over and your new bank will do the rest.
It usually takes around six weeks for everything to be moved over to the new account. Because direct debits often go out throughout the month and some may leave your account before your salary is paid in, most banks will either set up an overdraft facility to ensure all payments are honoured or guarantee that you won't be hit by penalty charges.
For more information on the potential traps and penalties associated with current accounts read our article 'How to choose a current account' and watch our latest video 'Current accounts: what's occurring?'. Once you know what you're looking for use our current accounts comparison tool to compare rates.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
Rate This Article
Click on a star to rate this article.
