How to find the best bank accountBanks battle for current account customers
11 January 2016
While Santander 123 customers will see fees increase from £2 to £5 per month from today, rival banks TSB, Barclays and the Co-op have all sweetened their current account deals.
Hot on the heels of M&S boosting its gift card incentive from £100 to £220 last week, TSB is now paying new switchers £100 cash back and Barclays has doubled monthly cash rewards for customers who join its rewards scheme throughout January.
Competition in the current account market is getting lively, with all the major players now offering switching incentives and other perks to attract customers.
Below, we go through what to look for in a bank account and list some of your best options.
Find out more: for personal guidance on financial matters, speak to the Which? Money Helpline
It’s rarely a good idea to switch to a new bank purely because it offers an attractive short-term perk, but if you’re already looking to move, it’s worth seeing what’s on offer.
Updated 12 January 2016
Clydesdale and Yorkshire Banks have now made their move, announcing the return of the£150 current account switching offer today, available until 31st March 2016.
The £150 is added to your account within 70 days of the account switch, provided you activate either internet banking or mobile banking within two months of completing the switch. Joint accounts are eligible for one payment only.
Right now, TSB is offering £100 cash back if you open a Classic Plus account via MoneySupermarket.com or MoneySavingExpert.com and complete the move by Friday 4 March. You must register at least two active direct debits and pay in a minimum of £500 within 28 days of the switch.
M&S switchers are also being wooed - you could earn a £100 M&S gift card plus an extra £10 added to the gift card for every month you deposit at least £1,000 in the first year, bringing the total to an impressive £220. We explain all the details in our news story on the M&S current account.
If you prefer hard cash, Halifax pays up to £160 in year one, starting with £100 for switching, plus a £5 reward each month you pay in a minimum of £750, pay out at least two direct debits and stay in credit.
Last autumn, First Direct improved its sign-up bonus from £125 to £150 for new customers going via Money Supermarket. To qualify for the cash, you must deposit £1,000 within three months of opening the account. Notable account perks include a £250 fee-free overdraft and a linked regular savings account paying 6% AER. However, this account charges a hefty £10 monthly fee if you don’t pay in at least £1,000 per month.
All of these offers require you to use the official Current Account Switching Service.
Find out more: how to switch bank accounts - our guide explains the process
Barclays says customers who sign up for its Blue Rewards scheme before the end of January will earn a possible £32, although this depends on you holding a mortgage, loan and home insurance with the bank and doesn’t take into account the £3 monthly fee.
The bank is also offering double cash back with various retail partners, including travel site Expedia (now paying up to 14% cash back until 31 January).
To qualify for these benefits, you must pay in at least £800 per month, set up a minimum of two monthly direct debits, and sign up for either the online banking service or the mobile banking app.
The new Co-operative Bank ‘Everyday Rewards’ scheme pays £4 for every month you stay in credit (or within any agreed formal overdraft), as long as you set up four direct debits, pay in least £800 each month, opt for paperless statements, and log onto online banking or the mobile app at least once a month.
On top of this, you earn 5p every time you use your debit card, up to a maximum of £5.50 per month (or £66 per year).
Find out more: bank account reviews - more than 70 bank accounts compared
In-credit interest and cash back
If you reliably maintain a positive account balance, you should get more out of an ongoing incentive, particularly now that several banks are offering market-leading interest rates.
As well as its new switching deal, TSB pays an impressive 5% AER on balances up to £2,000, as long as you pay in at least £500 each month. In addition, you’ll earn 5% cash back on the first £100 of contactless debit card or Apple Pay purchases each month until the end of December 2016.
Nationwide pays 5% AER on balances up to £2,500 for 12 months with free annual European travel insurance on top. This rate does fall to 1% AER in year two and you must pay in at least £1,000 each month to qualify.
The Santander 123 current account is popular with people who maintain a large balance because it offers tiered interest of 1-3% on up to £20,000. The Spanish bank also pays tiered cash back of 1-3% on household bills paid by direct debit so it can be a decent little earner, although it is important to factor in the new £60 annual fees and calculate the potential perks overall.
If you haven’t built up enough savings to benefit from in-credit interest, the NatWest/RBS Reward account pays 3% cash back on up to seven bills paid by direct debit (landline phone and broadband, TV packages, gas, electricity, water, council tax, mobile phone).
There is a £3 monthly fee, but with no cap on cash back earnings and no minimum monthly funding, it’s a decent offer. Use the online cash back calculator to estimate your potential earnings.