Free money: Banks up stakes to nab more customers

Halifax today became the latest bank to increase its cash offer, from £100 to £125, for anyone who switches to the bank and closes their old account held elsewhere.

It comes just days after First Direct announced it would increase its new joiner free from £125 to £150 for anyone switching through price comparison site Moneysupermarket.

Challenger bank TSB also got in on the act by launching its a 555 current account last week, which includes a cashback offer on contactless purchases, a 5% rate of interest on in credit balances up to £2,000 and access to a 5% savings account.

Nicolas Frankcom at price comparison site uSwitch.com suggested the spate of announcements showed that incentives were proving successful in luring customers away from competition.

“Ahead of the two year anniversary of the seven-day switching service, consumers are coming out on top as the banks pull out all the stops to win their hearts and wallets,” he said.

“But while cash incentives to switch aren’t new, traditionally it has been the smaller challenger banks using free money to shake things up. However, we’re now seeing HSBC, Halifax and Nationwide fight back.

“Many people are realising that switching is easier than ever, and while loyalty doesn’t pay, a switching incentive of up to £150 simply for moving banks, does. It may be time for the big banks to wake up to the fact that switching incentives are winning people over.”

It is worth noting that most offers tend to require that you pay a certain amount of money into the account each month or to set up a few direct debits. This is done to try and deter bargain hunters from simply applying for an account to bag the introductory perks and then never using it.

Below is a summary of the switching incentives offered by banks, according to uSwitch:

• First Direct - £150 to switch

• Clydesdale Bank - £150 to switch

• Halifax - £125 to switch and £5 per month

• HSBC - £100 to switch certain accounts only

• M&S Bank - £100 M&S vouchers

• The Co-operative - £100 to switch and £25 to charity

• Nationwide - If you switch following a recommendation, you and the person who referred you each get £100