Current account switching: which incentives get customers going?

24 May 2018
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Current account switching offers have taken a different path of late, with upfront cash offers declining while reward schemes and non-monetary offers are on the rise. But do these switching offers mask the quality of bank you’re switching to?

The latest figures for the Current Account Switching Service (CASS) reveal that in the first quarter of this year more than 250,000 current account switches were recorded by payment systems coordinator Bacs.

Looking at the bank-by-bank switching data makes for an interesting comparison of the various incentives they offer to tempt new customers.

The best switching offers vs customer retention

First Direct caught our attention recently when it withdrew its long-standing £100 current account switching offer. The bank didn’t wait long, however, to provide a brand new incentive to prospective customers.

This came in the form of product giveaways. Those switching to the bank could pick from a range of offers including electronics worth up to £190, a £150 Expedia voucher or even an online self-development course worth up to £700.

Unfortunately, as First Direct is a wholly owned subsidiary of HSBC, we can’t tell from the CASS data how many customers are joining and leaving which brand within the group. According to Bacs, the HSBC Group net gain (made up of people who’ve joined minus those who have left) was 15,146 customers in the 12 months between October 2016 and September 2017. See the table below for the top three winners and bottom three losers for current account switches. 

Current account switching – the winners and losers
ProviderQ4 2016Q1 2017Q2 2017Q3 201712 months (i)
Nationwide30,51038,68338,62626,003133,822
TSB2,79911,75020,1207,65442,323
Halifax141174,979-7,84029,20840,464
Clydesdale Bank-4,658-12,857-9,456-6,779-33,750
NatWest-9,675-10,264-13,826-16,583-50,348
Barclays-16,779-16,056-10,164-15,252-58,251

Source: Bacs. (i) October 2016 to September 2017

Another recent rewards shake-up came from Barclays, which has doubled its cashback incentive for a year for new customers who switch to it before 29 June.

So, sign up to Barclays’ Blue Rewards scheme, costing £3 a month, and deposit at least £800 monthly into your new current account, and you’ll earn double the cashback for 12 months. For instance, instead of the normal £7 monthly cashback for having a direct debit going out of your current account, you’ll earn £14. This creates a total reward of up to £384 over the course of 12 months.

Barclays, however, scores very poorly in the switching data. In the most recent 12 month-period available, it had the largest outflow of current account users of any UK bank – with a net loss of 58,251 customers.

"In the first quarter there were 250,000 current account switches"

If these new incentives don’t tempt you and you still want an upfront cash reward, unfortunately the offers available are currently very limited.

The current best buy for cash offers is from HSBC. This comes in the form of £150 up front, and a further £50 if you stay for 12 months. The offer does have some limitations however. You'll need to pay in at least £1,750 a month in order to retain the benefits of the Advance Account. In order to get the deal, you'll also need to apply for a switch before 30 June 2018. As with with First Direct, we don't know the specifc switching figures for HSBC alone. 

NatWest pays switchers the second most, with £100. However, this offer is only available until 15 June and you must meet other criteria. It saw a net outflow of 50,348 customers.

Halifax offers £75 upfront for switching, plus £3 a month for the first year if you meet the minimum monthly pay-in and have direct debits going out. This will earn you a total of £111 over a year. It recorded strong growth in terms of switchers, with a net gain of 40,464.

Curiously, the provider that has posted the largest net gain is Nationwide, which doesn’t even have a switching bonus. Instead, the Nationwide FlexDirect current account pays 5% interest on balances up to £2,500.

It must be thanks, in part, to this incentive that Nationwide has recorded by far the largest net gain of customers, at 133,822.

FEATURED PRODUCT

First Direct 1st Account

Switch to the First Direct 1st Account and you’ll get either a £150 Expedia voucher, a choice of electronic gadgets or an online course worth up to £700. The account also has a £250 interest-free overdraft; anything over that is charged at 15.9% APR.

 

In reply to by anonymous_stub (not verified)

How do you calculate £384 over the course of the year with Barclays reward?!!!! It's £14 minus the fee which is £11 a month, then £4 a month after a year.

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