Martin Lewis: Money Matters

Santander chief executive Ana Botin has helped to turn the fortunes of the bank around.
Santander chief executive Ana Botin has helped to turn the fortunes of the bank around.
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Once upon a time, bank accounts were ugly creatures that bit hard when you went overdrawn, and gave nowt back when you were in credit.

Today most still do exactly that. Yet a few innovative gems are starting to sparkle. So instead of bank bashing, today I’m applauding the bank accounts that pay.

It couldn’t be a better time. Last September, in response to multiple wrist-slappings for blocking competition, the banks finally made switching easier, launching the new ‘seven day switching’ system.

They now switch your direct debits and standing orders within a week, close your old account and ensure payments get forwarded to your new bank for 13 months.

The bank that pays you to pay your bills

Three years ago, Santander.co.uk was a customer service pariah. Now its innovative 123 current account is the customer service silver medallist, with 74 per cent rating it great. Roly tweeted me: “We’ve been using it for seven months – we’ve earned £350 with the credit card.”

You gain in two ways. Pay bills by direct debit and you get 3 per cent cashback on mobile, phone and broadband; 2 per cent on energy; and 1 per cent on water, council tax and Santander mortgage payments. These should dwarf its £2/month fee, as someone with typical bills earns £10/mth. It also pays a best buy 3 per cent AER savings interest if you’ve £3,000-£20,000.

To qualify, you must pay in £500/month (ie, a £6,000+ salary). You can also apply for its linked credit card which gives 3 per cent back on petrol spend (repay IN FULL to avoid interest).

The bank saving you up to £500 on travel, mobile and roadside insurance.

Many have been ripped off for years with fee-charging bank accounts. Some are even entitled to reclaim years of fees, which can add up to £100s (full help in http://www.moneysavingexpert.com/reclaimpackage.

Used correctly, a few fee-paying accounts can win. Nationwide.co.uk’s FlexPlus tops the tree. You pay £10/mth and included is European breakdown cover, family worldwide insurance (max age 74) and family smartphone insurance. A family needing them all could pay £600/year separately. For travel cover, ensure you disclose pre-existing conditions.

The bank that pays you £100 then £5 each month

The Halifax.co.uk Reward account pays no interest, just pays you £5 monthly after tax if you stay in credit. It also gives £100 for switching, so provided you don’t keep savings in there, it can add up well.

The bank service gold medallist

Your bank account’s the one financial product you interact with day-to-day, so service counts. So every six months, I poll on my site to find out which bank you rate the most. And every time I’ve done it Firstdirect.com has won the gold medal by a mile. Financially, it’s decent too, giving £100 to join and a 0 per cent overdraft for up to £250. So check your bank’s service in the list below. If it’s dire, why reward it with your continued custom?

The banks that give you a 0 per cent overdraft

An overdraft’s a debt like any other. If you go into the red often, the most crucial thing’s cutting its cost to give you respite to clear it. While Firstdirect.com offers a 0 per cent overdraft for up to £250, Nationwide.co.uk’s FlexDirect may give an interest-free overdraft for more, though it only lasts a year (it’s 50p/day after).

If that isn’t long enough to clear your debt, then it’s possible to shift your overdraft to a few specialist credit cards which are 0 per cent for 29 months. This can be a little tricky though, so read my full instructions on that, and best buys at http://www.moneysavingexpert.com/moneytransfers

It’s worth noting that if you regularly go beyond your overdraft limit, there are no competitive banks. While for those in severe hardship bank charge reclaiming is still possible - see http://www.moneysavingexpert.com/bankcharges - the best thing to do is try to keep a tight rein on your money.

The banks that don’t credit score you

Sadly, there are up to a million people in the UK without a bank account; and some banks don’t make it easy to get them.

For all the top pick deals above, you’ll need to pass a credit score. If that’s not going to happen, basic bank accounts don’t need credit checks, as they just provide a no-frills, no-overdraft service. You need ID to get one.

When applying, ask for the specific account by name – otherwise you could get forms for standard accounts, then get rejected. The better options include Barclays.co.uk Cash Card and Co-operativebank.co.uk Cashminder (not available to bankrupts).

Even though there’s no overdraft, they can still fine you if you try to spend more than you’ve got.

New couples’ railcard for £27

It’s the first new nationwide railcard in 30 years. The Two Together Railcard get couples, or any pair of named people a third off all rail travel.

It’s normally £30, but enter code TOGETHER10 at twotogether-railcard.co.uk by Wed April 30 for 10 per cent off, making it £27 for the year.

Free wills month for those aged 55 or over

Every March it’s Free Wills month, which allows those aged 55 or over to get a will drafted by a solicitor for nowt. Normally, you could pay £150 or more (+VAT).

This March the service is available in 19 towns, cities and counties, including Newcastle, Liverpool and Kent (enter your postcode at Freewillsmonth.org.uk to find your nearest). There’s limited availability, so move at speed to ensure you get a slot. As charities back the scheme, be prepared for your solicitor to ask you to consider making a bequest in your will, though you’re under no obligation.

• Martin Lewis is Editor of MoneySavingExpert.com