Current accounts battle heats up
The battle for current account customers' business is heating up as t wo major providers have unveiled moves to make their deals more attractive.
Barclays has announced plans for a new rewards programme which customers can opt into, paying them fixed cash rewards of up to £180 a year in return for a fee of £3 a month.
Meanwhile, as part of efforts to re-build its ethical reputation, the Co-operative Bank has reduced or removed some overdraft charges, in what experts said will help to take the "sting in the tail" out of borrowing.
Both providers said the changes were part of a wider move to put products in place which are simple for consumers to understand.
Barclays' Blue Rewards programme is set to launch on its banking app on Monday before being rolled out to online banking later next week.
To be eligible, customers must have a Barclays current account as their main bank account, depositing a minimum of £800 per month and having two direct debits paid out of that account.
Those who sign up will get fixed cash rewards, no matter if they are in credit or overdrawn. The cash rewards will be paid into a separate digital "wallet" and can be redeemed into a Barclays account at any time.
All customers who sign up and pay the £3 a month fee will receive £7 a month in cash back as a reward. Mortgage customers who are signed up will also receive £5 per month and customers who take out or renew their home insurance with Barclays will receive an extra £3 a month back as a reward.
This means that someone who has their main current account, mortgage and home insurance with Barclays could receive £15 a month or £180 a year, in return for paying £36-worth of fees to be in the rewards programme over that period. This would mean the customer gets a net cash payment of £144 a year, once fees have been taken into account.
The on-sale current accounts which can be used for the deal are the Barclays Bank Account and the Premier Current Account, neither of which pays in-credit interest. Older adult current accounts are also eligible, with the exceptions of Barclays' Cash Card, Young Person's, BarclaysPlus, Wealth and Foreign Currency and Business Accounts.
Barclays said it plans to expand the rewards programme over time, adding other products such as savings and personal loans.
The announcement came as the Co-operative Bank said it had revamped the overdrafts attached to its current accounts, which it said will make customers better off overall and reduce the chances of them being caught out by unexpected charges.
The new overdraft offering, which is now in effect, includes a reduced cap on charges, meaning customers will pay no more than £60 per quarter in fees, down from a maximum cost cap of £150 per quarter. The daily fee for going over an overdraft limit or overdrawn with no formal overdraft in place has been halved, from £20 a day to £10 per day.
A £20 annual "service fee" for arranging to have an overdraft in place has also been abolished.
Customers also have a £20 buffer, allowing them to go over their agreed limit by up to £20 without being hit by extra charges, although interest will still be applied.
Once a year, they will also be allowed six days' grace to return to their agreed balance before a fee is charged.
Co-op recently re-launched its ethical policy as part of efforts to rebuild its reputation after being beset by scandals. It said the development of the new overdraft has been shaped by listening to customers.
Competition between current account providers to make their offerings more attractive has been ramped up since new rules making it easier for people to ditch their old current account provider and switch to a new one were introduced in autumn 2013. The length of time it takes to switch has been cut from up to 30 working days previously to just seven.
A new online tool has also recently been launched to help people to see exactly in pounds and pence just how much better off they would be by going elsewhere.
Last month, comparison website Gocompare.com launched a Government-backed tool, which gives people a personally tailored view, based on their own banking history, of exactly how much cash they could save by switching elsewhere. The tool makes more than 1,500 calculations, taking the charges and perks attached to current accounts into account.
Andrew Hagger, founder of Moneycomms.co.uk, said of the Co-op's new overdraft: " It's a pleasant change to see a revamped overdraft charging structure where there's no hidden nasties or a sting in the tail.
"I'm also glad to see that Co-op Bank hasn't gone down the increasingly common route of introducing daily or monthly agreed overdraft fees as these hit customers with short-term and lower borrowing requirements particularly hard."
Kevin Mountford, head of banking at website MoneySuperMarket said: "This is a positive move from the Co-operative Bank and makes authorised overdrafts cheaper for customers who regularly dip into the red."