A&L and Abbey innovate current accounts but add catches
03 November 2005
The two banks, the UK's sixth and seventh largest, have taken the fight to their larger competitors in recent years through innovative extras such as decent rates of interest.
Britain's largest banks such as Barclays, HSBC, Lloyds and Natwest have been forced to improve on their offerings to stay ahead, and the latest moves could yet bring further added extras from them as they bid to stay competitive.
Alliance and Leicester Premier Direct Account customers – a revamped version of the old Premier Plus Account – have lost such perks as free travel insurance and branch access.
But they have gained one of the best overdraft rates on the market, however, at 5.9 per cent on both authorised and unauthorised overdrafts in the first year.
A second product, the Premier account, offers a zero per cent overdraft for the first year before rising to 7.9 per cent, has branch access and offers postal statements, although it will require savers to keep at least £500 in their account.
Abbey has also launched a new current account paying six per cent annual equivalent rate (AER), but has added several catches.
Over the first year the account only pays 2.5 per cent AER, with the extra interest added at the end of that period if the account is still open. Customers have to sign up within the next two months and must pay at least £1,000 into it every month.
The six per cent rate is also only payable on the first £1,000 after which the rate switches to 2.5 per cent. Only 2.5 per cent is also due after the first year.
Abbey is also offering a six per cent saving account with conditions attached. A maximum of £250 can be deposited a month and must be made for 11 consecutive months. If money is withdrawn the rate is slashed to a measly 0.75 per cent.
After the first year, the balance will be transferred to a 4.75 per cent saver account.
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