Consumers can earn up to £125 in cash simply by changing their current account as the big banks and building societies offer incentives to new customers in a bid for business.
It is worth looking closely at such pitches to switch, although there are plenty of disincentives to do so. Last week's OFT review of the £9 billion retail banking market, found that despite improvements, the market is bedevilled by lack of competition and low levels of innovation, diversity and clarity.
But there are rewards. First Direct is luring new customers with a £125 reward if they switch to its 1st Account. You must use the bank's Easyswitch service, transfer at least two direct debits and pay a minimum of £1500 a month into the account to qualify. The offer is also only available to people who have not previously held any account with the bank.
Loading article content
New customers who switch to one of Halifax's current accounts will earn a cash bonus of £100, as long as they transfer at least two direct debits. They will also pay no fees on any authorised overdraft for the first year. A switch could reap big rewards. The average overdraft rate is now 19.65% and the bank calculates that the deal could save a typical customer with a £700 overdraft £137.55 in charges.
Open a current account with M&S Bank and you could receive a £100 M&S gift card, plus 20% off M&S clothing and homeware for a year.
In many cases, it might be worth pocketing the bribe as it can often work in your favour to switch. You can also earn more money from the switch if you take advantage of any linked high-interest savings account.
But you must stick to the terms and conditions of the new account – and look out for charges. Kevin Mountford of Moneysupermarket.com says: "Consumers tend to be reluctant to switch their bank accounts. However, at times a cash incentive is enough to get us to take action. This is all well and good and in this day and age every penny counts, but make sure that when choosing a new account you look beyond the headline offer. You need to pick one that best suits your needs, and check the terms and conditions"
First Direct often tops the tables for customer service, so the 1st Account might appeal to people who are dissatisfied with their existing bank or building society. In fact, the bank is so convinced of its high standards of service that it offers a guarantee: if you are not happy after six months, First Direct will help you move to another bank and give you £100. The bank automatically extends a £500 overdraft facility when you open your 1st Account – and the first £250 of your overdraft is interest free. It then charges interest of 14.85%.
First Direct does not pay credit interest on the 1st Account but customers have the opportunity to open its regular saver account and earn a whopping 8% interest. You can pay in between £25 and £300 a month fixed for 12 months, so someone who paid in the maximum would earn £156 gross interest after a year.