Pick a current account offering long-term value
If you're normally in credit in your current account, a Halifax Reward Current Account or Santander 123 Current Account could provide the best long-term financial rewards, according to a report by Consumer Intelligence.
The Halifax account comes top for those on lower incomes over the long-term, while the Santander account is a better fit for middle and higher earners with significant in-credit balances.
What makes both accounts so competitive is the mixture of upfront and on-going rewards they offer. For example, the Halifax account offers an upfront £100 switching gift and £5 reward each month for those who pay in a minimum of £750 every month. This adds up to a £160 return net of basic-rate tax in the first year the account is opened, and £60 a year return thereafter.
Meanwhile, the Santander account pays in-credit interest from 1% (on the full balance if it is above £1,000) to 3% (on balances above £3,000) up to £20,000, and cashback of 1 to 3% on household bills paid by direct debit. This could give customers net annual returns of nearly £450 on an average balance of £15,000, or more than £83 a year for those with an average balance of £2,500.
Consumer Intelligence also highlights the Nationwide FlexDirect account, First Direct's 1st Account and the Vantage Classic accounts from Lloyds TSB and Bank of Scotland as providing good value over the long term.
With just a fortnight to go before the start of the Current Account Switch Service, which will make it easier for consumers to move their bank accounts, David Black, banking specialist at Consumer Intelligence, warns anyone considering switching not to get distracted by gimmicks.
"Overall, switching gifts and incentives can be tempting and there is sure to be a raft of new offers and advertising over the coming weeks, but if you are going to switch and then stick with one provider for a number of years, which most switchers probably will, then it makes sense to look at the long-term value of the account. Switching gifts tend to have more value for those who have smaller incomes and household bills, who can't get so much value from their accounts through elements like in-credit interest or rewards."
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.