HSBC, for example, has introduced a new deal offering those who stay in credit a market-leading interest rate of 6% for 12 months on balances up to £2,500, while the Co-operative Bank is offering customers in the red three months interest-free on arranged overdrafts.
MoneySupermarket is joining forces with First Direct to reward its users with an exclusive offer of £125 cashback – available to anyone who switches to the bank’s highly competitive 1st Account.
And, for the first time, Halifax is also offering a switching incentive of £100 to anyone who opens one of its current accounts before February 19.
Kevin Mountford, head of banking at MoneySupermarket said: “2012 has kicked off with renewed activity in the current account market as banks fight to win our custom.
“Although consumers may not wish to switch current accounts on a regular basis, it is important to review your account from time to time to make sure it suits your financial situation, otherwise you may fail to get the best value.
“The key is to think about how you use your current account, and then shop around for the deal that best suits your needs.”
Here, we examine the pros and cons of each deal and look at how they stack up against the competition.
The HSBC account
To benefit from the new HSBC 6% in-credit rate, you must open a bank account, Advance account or Premier account before January 31 and submit a “Switching your account to HSBC” form by February 29 at the latest.
You must also pay at least £500 a month into your account and transfer at least two direct debits or standing orders to qualify. The advantages on offer for those who meet these terms are considerable, though.
As well as earning interest at a market-leading 6% on balances up to £2,500, account holders also have access to a Regular Saver account paying 4%.
In addition, there is the peace of mind of knowing that your account transfer will be managed by the bank’s “hassle-free switching service” and that you can choose between managing your money online, by phone or in HSBC branches.
However, disadvantages of the deal include that, should you slip into the red, you will be charged a massive representative APR of 19.9% (variable) on an arranged overdraft.
The deal is also not available to existing HSBC customers.
The Co-operative Bank offer
The average British adult accumulated around £750 of debt last year, with 27% more of the population falling into the debt trap than in 2010.
In response to this, the Co-operative Bank is offering extra help to its customers, by removing interest charges on arranged overdrafts for the next three months.
The bank claims that a current account customer who has an agreed overdraft of £2,000 could save £75 in fees as a result of the three-month suspension of charges.
Robin Taylor, head of banking at the Co-operative Bank comments: “In these difficult economic times, we want to offer a helping hand to those customers who may be struggling financially, and give some additional support to those whose finances have been stretched by the festive period.”
The good news for anyone interested by this offer is that the Co-operative Bank Account Plus already makes the MoneySupermarket best buy tables due to its relatively low overdraft representative APR of 15.9% (variable) and £200 interest-free overdraft buffer.
Other benefits of the account include linked savings, credit card and mortgage deals and that it can be managed online, by phone, by post or via Co-operative Bank or Post Office branches.
It is not a good choice for those who spend most of their time in credit, though, as no interest is paid on balances.
The account is also only open to those who pay in more than £800 a month for at least the first three months.
The MoneySupermarket/First Direct exclusiveThe First Direct 1st Account is only an option if you are able to pay in at least £1,500 a month. However, the flexible account, which can be managed online, by phone, by post or in branch, offers all new customers a £100 switching incentive. And MoneySupermarket users who apply for the account via the website get an extra £25, pushing the total cashback bonus up to an impressive £125. What’s more, First Direct – which has won numerous awards for customer service – is so confident that you will like the account that it is offering another £100 to anyone who decides to switch away after the first six months. Mountford added: “Many people are put off switching by the perception that it can be a complex process. But the reality is that nowadays switching is fairly easy, with many banks having dedicated teams to ensure the move runs smoothly.” The overdraft terms of the account are attractive as its arranged overdraft rate is a competitive 15.9% and there is a £250 overdraft buffer to protect against penalty charges. Account holders also have access to a Regular Saver account paying a massive 8%.The main disadvantage of the offer, however, is that no interest is paid on in-credit balances.
The Halifax Switching IncentiveHalifax will pay £100 – paid on the day the account is opened – to anyone opening a current account with the bank between now and February 19.
Qualifying accounts include the Halifax Reward Current Account, which gives customers paying in at least £1,000 a year a bonus of £5 a month – equivalent to interest of £60 a year.
However, this account won’t suit those who regularly slip into the red, as the overdraft charges are steep. You will be charged daily fees of £1 for arranged credit of up to £2,500, £2 for arranged credit of above that amount and £5 for unauthorised debts, so this account is only worth considering if you only go overdrawn very rarely.
What else is available?
While the accounts mentioned above all have some very competitive features, the market-leading current account remains the Santander Preferred Current Account.
Its features include credit interest of 5% on balances of up to £2,500 and an arranged overdraft rate of 0% for the first 12 months, as well as a switching incentive of £100 cashback.
If you are an existing Santander mortgage customer, you will get £200 cashback if you switch your current account to the bank. And if you are a mortgage customer with at least £10,000 to deposit in a Santander savings account as well then you will receive an even more generous £300 cashback.
You must, however, agree to pay in at least £1,000 a month into the Preferred account to qualify. Bear in mind too that the 5% in-credit interest rate plunges to a much less appealing 1% after the first year.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.