The fallout from this month's base rate cut is hitting home. As MSE revealed on Sunday, Santander will slash the headline rate for its 3m+ 123 current accounts from 3% to 1.5% in Nov (see Martin's Should I ditch 123? analysis). Then came the aftershocks, as Lloyds and Halifax told us ALL their current accounts are "under review".
Yet you can still make easy money switching bank - which itself is hassle-free. Some providers pay big cash bribes and have market-leading fixed savings to protect you from rate cuts. Because of the rapidly changing market we've checked with all providers below and unless stated they've no changes planned.
1. Free up to £150, 6% fixed savings - protected from rate cuts. The beauty of cash bribes and fixed savings is once the accounts are opened and the bank switch completed these are locked in. This is regardless of base rate cuts or banks just dropping benefits at their whim - and that security is crucial in these turbulent times. However, any additional perks can still change. Here are the headlines:
- Free £150 + up to £5.50/mth: Co-op Bank* pays switchers £150 (need to switch 4+ active direct debits), plus sign up to its Everyday Rewards scheme and jump through a few hoops to get up to £5.50/mth. No min pay-in for the £150 but it's £800/mth for the extras.
- Free £100 + no.1 service + 6% FIXED savings:First Direct* pays a £100 bonus to switchers. It also has a £250 0% overdraft and linked 6% regular savings on £25-£300/mth fixed for a year. Min pay-in: £1,000/mth (£10/mth fee otherwise).
- Free £100 M&S gift card + 6% FIXED savings + £10/mth:Switch to M&S Bank* and get a £100 M&S gift card, £100 0% overdraft and 6% linked regular savings on £25-£250/mth fixed for a year. No min pay-in, but for each month you deposit £1,000 in the first year, it adds a £10 gift card.
- Free £100 + £5/mth for now. WARNING - under review: Halifax Reward gives switchers £100, plus £5/mth if you stay in credit, but avoid if regularly overdrawn or you'll face high £1-£3/day charges. No min pay-in for the £100; it's £750/mth for the monthly rewards.
Full eligibility info and more best buys in Best Bank Accounts.
2. Get up to 5% 'savings' interest - but rates aren't certain. This market is more susceptible to base rate cuts as its selling point is the savings interest. It was turned on its head by Santander's cut, but smaller savers can still get good rates. Here are the top accounts, but beware: you've no certainty with variable rates.
- 5% FIXED in year one: Nationwide FlexDirect* is 5% AER fixed for a year on up to £2,500, 1% AER variable after (£1,000/mth min pay-in).
- 5% variable + £5/mth: TSB* pays 5% AER variable on up to £2k, plus you can get up to £5/mth cashback on contactless spending (£500/mth pay-in).
- 4% variable interest but on higher sums: WARNING - under review: Club Lloyds pays 4% AER variable on the full balance if you've £4k to £5k in it (£1,500/mth pay-in).
- Rate to dive from Nov, still good for big savers: Santander* will pay 1.5% AER variable on up to £20k from Nov (up to 3% before). Its £5/mth fee is covered for most by up to 3% bills cashback (£500/mth pay-in).
3. Seven-day switching means it's mostly no hassle. Just 3% switch banks every year but the perceived hassle is more myth than reality.
Seven-working-day switching was introduced almost three years ago and it's been a game changer. Now your new bank: a) Switches direct debits and standing orders for you. b) Closes your old account. c) Ensures all payments wrongly taken from or paid to the old account come or go to the new one for three years.
The competition regulator last week announced plans to encourage more switching, but they're a long way off. In any case, of those we polled earlier this month, 76% said it was easy or little hassle. Gavin is typical: "I had no problems - very easy and only took 5 minutes to complete a form".
4. Revealed. The best and worst banks for customer service. Good service is important on your current account, so we ask you how you rate your bank twice a year. Here's the latest result, with a familiar winning face - First Direct, which has won every MSE bank service poll.
Top Major Banks For Service (over past six months)
1. First Direct: Great: 91%; Poor: 3%
2. Nationwide: Great: 79%; Poor: 4%
3. Co-op Bank (incl Smile): Great: 72%; Poor: 5%
4. Santander: Great: 71%; Poor: 6%
5. TSB: Great: 71%; Poor: 7%
6. Halifax: Great: 58%; Poor: 8%
7. Lloyds: Great: 50%; Poor: 15%
8. Bank of Scotland: Great: 49%; Poor: 16%
9. RBS: Great: 48%; Poor: 19%
10. NatWest: Great: 46%; Poor: 18%
11. Clydesdale & Yorkshire: Great: 44%; Poor: 19%
12. Barclays: Great: 43%; Poor: 21%
13. HSBC: Great: 38%; Poor: 18%
Users could choose 'great', 'OK' or 'poor'. See full results.
5. Cut overdraft charges to 0%. An overdraft's a debt like any other, so if you often go into the red, cutting its cost makes it easier to clear. Like any other debt though you will be credit-scored when switching.
- Under £350 overdraft? Switch to 0%: First Direct* has a £250 0% overdraft, but also currently gives £100 to switchers, so that'd instantly clear some. So providing you can meet its min £1,000/mth pay-in, nothing beats it.
- Larger limit possible but not certain: Nationwide's FlexDirect* may give a bigger 0% overdraft, but only for a year (50p/day after, so aim to clear before). The overdraft limit you get's credit-score dependent. Full info & more ways to save in Cut Overdraft Costs.
6. Free travel insurance - great for older travellers. The Nationwide FlexAccount* is fee-free and incl European travel insurance for account holder(s) up to age 74 - important, as cover is expensive as you get older (min pay-in £750/mth).
Full eligibility info and more options in Best Bank Accounts, or see Cheap Travel Insurance to compare. As with all travel policies, always disclose pre-existing conditions.
7. Will I definitely get the top accounts and their perks? To qualify you usually need to use their switching services, pass a credit check, have 2+ direct debits set up and possibly meet other criteria.
8. Is it worth paying a monthly fee for a packaged bank account? Many waste big money paying for insurance extras (such as travel or mobile cover) they don't use. If so, cancel and go fee-free. If you only did it because the bank said you must, try our free reclaim packaged bank fees tool.
If you need insurance, packaged accounts can win. For £10/mth the Nationwide FlexPlus* gives world family travel insurance, family smartphone insurance and European breakdown cover. A family needing them all could pay £600/yr separately. See Top Packaged Accounts for more options.
9. Barclays customer? Get £48/yr free. Its service is questionable and it's not great on perks, but if you want to stick, at least get a free £48/yr from Barclays.
10. The accounts if you can't get an account. You need to pass a credit check for those above. Yet basic bank accounts don't do such stringent checks (though most do a credit check for ID purposes), as they just provide a no-frills, no-overdraft service.
Options include the Barclays Basic Account, Virgin Money's Essential Current Account and Co-op Bank's Cashminder. See Basic Bank Accounts for full info.
11. Can I still reclaim bank charges for going beyond my overdraft? Yes, if it's contributed to financial hardship - see Bank Charges Reclaiming.
This article first appeared in the weekly email on 17 August 2016 and was updated on 23 August 2016.