Popular current accounts have lost their appeal in recent months owing to a raft of tweaks to benefits – and more bad news is on the way.
Halifax is the latest bank to announce an adjustment, affecting its Ultimate Reward account.
Some customers may feel it doesn’t live up to its name when the fee increases by £24 a year from December 1.
At the moment the fee is £17 a month unless customers who pay at least £750 a month into the account, set up at least two direct debits and do not use an overdraft, in which case it is £15.
But under the new rules the fee will be £17 a month for all.
Customers will be offered one of two choices from a new Reward Extras package – but both involve a lot of spending or a lot of saving.
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A £5 monthly bonus is awarded when account-holders spend £500 a month on their debit cards or keep a balance of £5,000 or more, pay in at least £1,500 a month and stay in credit.
Meanwhile, Nationwide is scrapping daily fees for arranged borrowing on an overdraft in its range of ‘Flex’ accounts from November 1. Instead it will apply a blanket interest rate of 39.9 per cent a year to all borrowing. The existing £10 fee-free borrowing ‘buffer’ will be removed.
FlexDirect customers using a fee-free arranged overdraft, available in the first year, will continue to benefit until it expires. FlexPlus customers – who pay £13 a month for a package of perks such as travel insurance – will no longer get 3 per cent on savings up to £2,500.
The £250 fee-free overdraft will also be scrapped. However, there are no longer transaction fees for spending on the card while abroad.
Changes to Halifax and Nationwide deals come hot on the heels of a string of changes to rival accounts that could dampen enthusiasm for switching in future.
Andrew Hagger, co-founder of research company MoneyComms, says: ‘There have been plenty of changes to current account products in 2019 and most of it has been bad news for customers – with even more to come from November.
‘And the days when current accounts were a good home for a chunk of your savings are long gone – with most of the generous deals slashed beyond recognition or gone completely.’
HSBC recently ditched its £175 switching incentive. Tesco Bank slashed its interest rate for positive balances from 3 per cent on the first £3,000 to 1 per cent, while TSB mirrored the move with a cut from 5 to 3 per cent on the first £1,500 saved in the account.
When it comes to using a bank account for savings, Hagger recommends keeping the latter in a separate savings account.
He says: ‘Use your current account to manage daily spending and bill paying, and keep your savings separate in an online instant access account.
‘You can earn 1.5 per cent with instant access via the likes of provider Marcus, with no restrictive maximum balance limit to worry about.’
But you should look at alternative accounts if you are receiving nothing by way of perks, savings interest or good service from your bank.
Metro Bank and First Direct both come top of official polls run by the Competition and Markets Authority for customer service.
First Direct also offers a £50 switching bonus, £250 fee-free overdraft and access to a regular savings account paying 5 per cent.
M&S Bank offers a £100 interest-free overdraft, a £100 M&S gift card when you switch, plus another £80 gift card after 12 months. It too offers a regular savings account at 5 per cent.
Santander’s 123 account charges £5 a month but pays up to 3 per cent cashback on monthly household bills and interest of 1.5 per cent on balances up to £20,000.
Challenger Starling Bank, which offers a current account on a mobile phone, pays 0.5 per cent on balances up to £2,000 or 0.25 per cent up to £85,000 and does not charge fees for spending on the card while overseas. Like established rivals it is also part of the Financial Services Compensation Scheme, which guarantees up to £85,000 per person, per institution if a bank goes bust.
The free Current Account Switch Service can help anyone wanting to move deals. It automatically transfers direct debits and standing orders to a new account and comes with a raft of guarantees to reassure customers they won’t lose out if something goes wrong.
A spokesperson for comparison website MoneySuperMarket says: ‘Millions of people are still with the bank they opened their first current account with, often decades ago.
‘With the Current Account Switch Guarantee, people can be confident that switching will be a smooth, hassle-free process, and that everything will be wrapped up in seven working days.’