Santander launches top current account
Santander has launched a current account offering new customers £100 to switch and an in-credit interest rate of 5%.
The interest rate is fixed for 12 months and available on balances up to £2,500, which means a maximum amount of £125 interest can be accrued.
The £100 bonus for switching is the same as the deal previously offered by Alliance & Leicester, which is owned by Santander and in the process of re-branding its products to align them with Santander's.
Consumers hoping to take advantage of the offer must make the account their main current account and pay at least £1,000 per month into it.
People who have held a Santander account in the last three months or who currently have an account with the bank are not eligible for the offer.
This limitation also extends to those who have held, or still hold, an A & L, cahoot, or Cater Allen account, all of which come under the Santander umbrella.
In addition, customers must have at least one active direct debit set up on the account within 11 weeks of opening it - if they don't have any direct debits to switch they will be unable to apply for the account.
While the 5% interest rate is a competitive rate, customers should be aware that any balance held over £2,500 will not gain any interest.
After 12 months, the rate will reduce to 1% AER (variable). At this point, consumers might want to consider switching again, depending on whether there are more competitive accounts on the market.
How to switch
Last year, only 6% of consumers switched their current account, according to the Office of Fair Trading.
If you are considering switching current account, it is important to think about what your prime use of the account is.
If you’re usually in credit then look for an account with a high in-credit interest rate, but if you’re regularly in the red then a low overdraft rate and high limit are more important.
Banks are obliged to co-operate to make the process smooth. Take two forms of ID, one with a photograph and the other with a proof of address such as a utility bill for example. After that, you need to fill in two forms: a new account application and a transfer form.
Once accepted by the new bank, in most cases it should take care of transferring your standing orders and direct debits. The whole transfer process can take up to a month so a good tip is to keep some money free in the old account in case of delays.
Some banks will inform your employer, but tell them yourself to be on the safe side. Once you're happy everything has been transferred over close your old account.
Some banks routinely offer cash incentives to lure in customers and these are worth looking at. At the moment, Santander is offering customers £100 to switch to its Preferred in-credit rate account for example. The account offers 5% in-credit interest rate.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.
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