Belfast Telegraph

Friday 25 July 2014

Banks offering better incentives for new current account holders

The latest move has come from HSBC, telling customers it will scrap unpaid transactions fees of up to £25 on its current account
The latest move has come from HSBC, telling customers it will scrap unpaid transactions fees of up to £25 on its current accounts

Now that switching should be easier and quicker, many banks have been polishing up their current account offers to attract new business.

The latest move has come from HSBC, telling customers it will scrap unpaid transactions fees of up to £25 on its current accounts.

Other banks have introduced cashback incentives and in-credit interest, but could these improvements be a prelude to monthly fees on all accounts and an end to free banking?

All of the nine million current account customers at HSBC and first direct (owned by HSBC) will no longer be charged a fee if their bank declines a transaction due to insufficient funds.

Any charges incurred up to that time will still be payable, starting from a £10 fee for transactions up to £25 and a fee of £25 for transactions in excess of £25.

However, this move has been promoted as the first step towards a more straightforward overdraft service with further changes to be announced in 2014.

"In the past two years most banks have moved to reduce their unauthorised borrowing charges and unpaid item charges," says HSBC spokesman James Thorpe.

"Our objective is to find a structure which blends simplicity and transparency with value for money."

Ditching unpaid transaction fees will be welcome news to customers – it is difficult to stomach being charged for something that the bank hasn't actually had to process.

Halifax has already scrapped fees for unpaid transactions.

Otherwise, all of the big players hit customers fairly hard and until it is removed next week.

HSBC is one of the worst offenders, charging £25 for unpaid transactions along with the Santander Everyday account.

The FlexAccount from Nationwide Building Society also stings customers with a £15 fee per item and Lloyds charges £10 per item (up to a maximum of three per day).

Current accounts have been enjoying the limelight since the new, seven-day switching guarantee scheme came in last month.

Providers have been cranking up their marketing ploys by improving their accounts with added benefits such as cashback, interest or even streamlining their overdraft fees.

Clydesdale and Yorkshire Banks have launched a new current account paying 4% interest on in-credit balances of up to £3,000, for example, although this rate falls back to 2% after 31 March 2015 and you need to deposit at least £1,000 a month to benefit from this interest.

Halifax customers now earn up to 15% cashback at certain retailers with the launch of Cashback Extras, and its sister-bank, Lloyds, will also offer its online-banking customers up to 15% cashback for purchases at various retailers including Argos, Homebase, Morrisons and Ocado when "Everyday Offers" comes into play at the end of the month.

Renewed competition in the market is great news.

But there is a concern that these improvements could be a stepping stone for banks to spread the cost to the wider current account base and potentially start introducing monthly fees.

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