Banks in the UK tempt Northern Ireland savers into switch with cash offers
Cashback offers, fee-free overdrafts and savings on household bills are tempting more and more people to move their current accounts from Northern Ireland banks to larger UK rivals such as Halifax and Santander.
Across the market generally, customers who remain in credit could save themselves on average £70 a year by switching, and people who heavily use their overdraft can save up to £260 a year, according to a Competition and Markets Authority (CMA) report.
Halifax's Reward Current Account gives customers a £5 reward for each month they pay in a minimum of £750, stay in credit and have at least two active direct debits coming out. Plus the bank offers a £100 switching bonus paid within three working days of completion when customers use the Current Account Switching Service (CASS).
The Santander 123 current account gives cashback on certain household bills and interest (currently 3% AER variable) on balances from £3,000 to £20,000 for a £2 monthly fee if more than £500 is paid into its 123 account and at least two active direct debits come out.
Almost 5,000 people have moved their current accounts from Northern Ireland's big four - Danske Bank, Ulster Bank, First Trust and Bank of Ireland - to UK rivals in just three months, the Belfast Telegraph revealed yesterday.
However, trying to get new business by encouraging customers to switch from one bank to another is not an attractive idea, according to economy expert John Simpson.
"A lot of these tactics can be self-defeating," he said. "The search for new accounts will increasingly be directed to the young new account holder or the account holder who signs up for a loan or a mortgage.
"It is no accident that the banks are now so active in offering mortgage finance (even with tighter official policy restricting excessive loans relative to income).
"The high street banks are facing a long-term squeeze which is more serious than the immediate customer fall-out from the recent glitches in day-to-day business," he added.
"In Northern Ireland, banks are now trying to rebuild profitability after serious losses caused by the bust in the property market.
"Banks need to make money but are now lending at interest rates which are low by the standards of recent history.
"The knock-on effect is that the banks would have difficulty maintaining a system of free banking to current account customers.
"Charges for operating current accounts, charges for specific banking services and incentives linked to maintaining minimum balances are becoming normal.
"Local banks are now profitable again, but less profitable than a decade ago. New arrivals, such as Santander, have sharpened competition.
"Cross-border banking poses new threats as the exchange rate for the euro and sterling has become more volatile. Risks of exchange rate losses have emerged and will influence some big cross-border businesses."