High Street Banks S Launch Big Battle for the Public's Current Account Business; Jeremy Gates Reports on Why Banks Are Fighting for Your Current Account with Cash Prizes

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Byline: Jeremy Gates

WHEN Britain's high street banks launched a charm offensive to win new current account customers earlier this year, some observers feared their strategy concealed a cunning plan.

Betting that the Independent Commission on Banking, chaired by Sir John Vickers, would trigger a demolition of Britain's 'free-banking' model, sceptics suggested that the banks would grab lots of new customers before clobbering them with charges in a few years time.

Most people, after all, hold only a few hundred pounds or a thousand or two in current accounts, if anything at all. So, why the sudden strong interest? David Black, at Defaqto, a financial research company, says: "The current account is really a key relationship with a client.

"From a current account, the bank finds out what you can afford, and your liabilities, on a regular basis.

"The current account reveals far more about a person's financial position than a credit card, for example."

While Vickers's recommendations did point in the direction of charging account holders more than many currently pay, the plans could take some years to implement.

But goodies, incentives and special deals for those who open a current account with a high street bank continue to gush: they want your business, regardless of whether you are in the black or the red.

According to personal finance magazine Moneywise, a consumer who keeps switching accounts could bag a total profit of pounds 700 before, possibly, going back to the bank they started with.

For example, a pounds 200 gift awaited anybody who switched an account to The Co-operative Bank - provided they also moved all direct debits and standing orders across and paid at least pounds 800 a month into the account for the first three months.

Kevin Mountford, at financial website MoneySupermarket.com, was impressed.

"It is good to see the Co-op taking on the big five banks.

"The deal comes off the back of The Co-operative Bank enhancing its current account products to provide additional benefits for a monthly fee.

"The Co-operative Bank's customer service regularly receives industry honours, so this could be a good alternative for anybody unhappy with their existing bank." Consumers obviously agreed. The deal vanished after five days.

"Presumably they got a lot of applications," says Black.

Andrew Hagger, at financial website Moneynet.co.uk, added: "With its record for customer service and a bigger branch network from the link with Britannia, The Co-operative Bank was going to stir a lot of interest," he says.

Hagger is a fan of First Direct, HSBC's online bank. Currently there's a pounds 100 gift for switchers to its 1st Account, where a pounds 250 interest-free overdraft is standard.

First Direct also allows current account customers to put a maximum pounds 300 per month into a regular savings account paying 8% for a maximum 12-month period - a great return on a maximum pounds 3,600 in these tough days for savers.

Hagger says: "First Direct scores highly in consumer surveys on quality of service; the UK call centre, open 24 hours a day, doesn't try to sell you anything when you call. They just do what you ask."

Perhaps the big surprise is the drive by Santander.

It has three 'carrots' to tempt switchers: Existing mortgage customers with Santander who switch their current account and savings of at least pounds 10,000 get a pounds 300 gift; mortgage customers who switch only their current accounts get a pounds 200 reward; and other consumers, with no links with Santander, get pounds 100 for moving their current account.

Once they have moved, new customers in Santander's Preferred Current Account enjoy 5% interest on their current account, on balances up to a maximum of pounds 2,500. To collect this generous rate of interest, customers must ensure at least pounds 1,000 per month goes into their account. …