Banks and building societies are so desperate for your cash, you can now get a £100 cash lump sum or even a yearís worth of interest-free overdraft just for switching.
And given that moneyís tight and banks arenít known for their generosity, itís time to take advantage of these freebies.
Here we look at the best offers available. However, itís important to choose the best offer that suits your personal circumstances in order to benefit as much as possible. Thatís because banks are constantly changing their terms and conditions, charges and incentives.
The first step is to work out what sort of a customer you are.
Are you constantly overdrawn or do you make sure you never go in the red? Do you get a regular monthly salary or are you a freelance, getting nothing for months on end and then feeling flush when all your invoices are settled at the same time?
Most of us will already have a good idea of how we manage our finances but if you are unsure, itís a good idea to look over the past few monthsí of bank statements to make sure.
Are you always in the black?
Naturally, if you are never overdrawn, youíll never incur any overdraft charges, which is a great start. So the next hurdle is to make sure youíre earning as much interest on your current account balance. However, even in the best accounts youíll only earn a decent rate of interest on a limited amount of cash. After that limit has been reached, the interest rate on the remainder is likely to be derisory.
The best idea is to keep your in-credit balance close to, but not higher, than the amount that gets you a high interest rate. You can then sweep the rest of your cash into a top paying savings account.
The problem with this system though is that it takes a lot of time and effort to keep an eye on your balance and shift your money around.
However, if you discover youíre good with your money and that you always put away a certain amount of money each month and never go overdrawn, then you should go for one of the new ìincentivisedî accounts we look at below ñ if you havenít already got one.
The clear favourite if youíre taking home at least £500 a month has to be:
ï The Alliance & Leicester Premier Account
This offers a lump sum of £100 put into your account on opening, 0.5% interest on your in-credit balance, plus free European travel insurance and a 0% overdraft facility for a year. To get the cash bonus, youíll need to pay in at least £500 a month from a non-Alliance & Leicester account within 11 weeks and use its Premier Switching Service to move across your direct debits and standing orders.
Unless you keep a particularly large sum of cash in your current account, itís highly unlikely that the interest youíll earn will outweigh the £100 bonus you will get from the A&L account. And as a further bonus, youíll also get £25 if you successfully refer a friend to open an account. A clever idea is to open an account at the same time as a friend. In this way you can both refer each other and benefit from the extra cash bonus.
You can bank online, via branch or phone.
The only downside to this account is that anyone who has held an Alliance & Leicester, Abbey or Cahoot account in the previous three months cannot get the bonus, as they all are now part of the Santander banking group.
ï First Direct 1st Account
If you earn at least £23,500 a year and already have a Santander Group account, then a First Direct current account is the next best option. It too pays a £100 bonus but youíll need to pay in a minimum £1,500 per month for the first three months. Unlike the Alliance & Leicester deal, you wonít get the free travel insurance or the £25 friend referral payment and you will be charged £10 for each month you fail to deliver the required £1,500. However, you will get a free overdraft of up to £250.
If you already have an account with Alliance & Leicester or Abbey, then this is usually the winner, provided you are sure you can meet the first three monthly payments of £1,500.
ï Halifax and Bank of Scotland Reward Accounts
If you earn less than the £1,500 a month needed for the First Direct account and already have a Santander account, then your best bet are the Halifax or Bank of Scotlandís Reward accounts.
These both reward you with a £5 bonus each month you deposit at least £1,000. You can also miss any month’s £1,000 pay-in without any penalty – you just won’t earn that month’s £5.
As this £5 reward is fixed, it makes sense not to keep too much in this account and instead transfer any excess to a separate savings account. But donít sniff at the prospect of an extra fiver each month as with just £500 in your account, this amounts to the equivalent of a whopping 15% interest ñ thatís a rate you wonít find anywhere else!
But take note that this is not for you if you ever go overdrawn. It charges £1 a day for being in the red or £2 if you go overdrawn by £2,500.
Compare and apply for a new current account online today.