New NatWest and RBS current account pays back 3% on household bills
NatWest and RBS are launching a new current account paying customers 3% back on household bills as the battle to tempt in consumers with a vast array of perks heats up.
The deal, which charges a fee of £3 a month, will be available from October 12. Customers will receive 3% back on a range of household bills, including council tax, gas, electricity, water, phones, TV and broadband.
There is no maximum or minimum limit to the number of bills that can be included, as long as customers pay their bills by direct debit through their account.
NatWest/RBS said that customers paying more than £100 a month in eligible household bills by direct debit will earn their £3 monthly fee back, and on average, customers can earn £90 a year, net of the £3 fee.
Once customers have earned £5 in a rewards pot which is held separately from the account, they can then cash it in, trade it for shopping vouchers or donate it to charity.
However, there is no in-credit interest with the account and the bank also charges a £6 monthly fee to customers going into their arranged overdraft, which would eat into any benefits from getting cashback.
NatWest/RBS said that it has an online calculator so that customers can check if they will benefit before they open the account and it will regularly review accounts so that customers earning less than the fee are contacted and moved onto an account with no monthly fee.
The move is the latest sign of competition between current account providers ramping up, following the launch of a seven-day switching service in 2013 to make it easier to move to another provider.
A growing number of providers are offering cashback as well as returns on balances that appear generous in the current low interest rate environment.
TSB recently launched a deal where current account customers can earn 5% cashback on on the first £100 of contactless debit card purchases made from their account each month as well as 5% interest on current account balances up to £2,000 and 5% interest on a monthly saver account.
In September, Tesco Bank removed a £5 monthly fee that it previously charged to current account customers depositing less than £750 a month.
The change means anyone with a Tesco Bank current account will earn 3% interest on credit balances up to £3,000, without having to pay a monthly fee.
Meanwhile, Santander, whose innovative 123 account has been particularly popular in the current account switching battle, recently said that the annual cost for its account will shoot up from £24 to £60 from January. The 123 account pays up to 3% interest on balances of up to £20,000, as well as cashback on household bills.
Rachel Springall, a finance expert at website Moneyfacts.co.uk, said the new NatWest/RBS account could be "a great little earner if used to the fullest".
She said: "As Santander will be upping its £2 a month fee to £5 per month in January on its 123 current account, which currently offers up to 3% on certain bills, it wouldn't be too surprising to see some customers flock to this new NatWest and RBS reward account."
She continued: "Customers who typically stay in credit and want credit interest could look towards the Halifax Reward Current Account, which is an enticing option, as not only will they pay a £125 in a switching incentive, they will also pay a £5 a month loyalty payment, so long as customers pay in £750, stay in credit and set up two direct debits."
Andrew Hagger of Moneycomms, said the move may in part be a reaction to industry figures showing where people using the new seven-day switching service are moving to.
Figures recently published by payments body Bacs showed that in the fourth quarter of last year, NatWest made a net loss of 16,000 customers using the switching scheme, while RBS lost 11,000 customers using the switching service.
Santander made a net gain of more than 45,000 customers between October and December, and Halifax gained more than 40,000 customers.
Nationwide Building Society, which has a current account paying 5% interest, and newer player Tesco also made net gains during the period.
Mr Hagger said: " The top two performers in the switching stakes by a country mile have been Halifax and Santander - both offer rewards and maybe it's now being seen by other banks that you need to offer tangible rewards to loyal customers to persuade them to stay."