Do loyal customers get a better deal?


Updated on 25 July 2012 | 1 Comment

With banks behaving badly, are there any advantages to staying loyal?

It seems like it has been one awful banking scandal after another these past few weeks. So it’s not surprising that many of us are fed up with some of the biggest names on the high-street and want to move our current accounts in protest.

But if you're thinking of switching, you may want to think about more than just the rates and features offered by a particular current account. Remember that some banks also reward customer loyalty by reserving some top products for existing customers.

So let’s take a look at a few examples of deals that reward customer loyalty. Then you can decide whether loyalty deals should be an issue when you're thinking about switching current account. 

The Nationwide loyalty bond

Nationwide recently launched an attractive fixed rate bond that is exclusively for existing customers. The two-year bond pays a market leading 3.8% rate and the minimum deposit is just £1. 

Nationwide’s definition of a ‘loyal customer’ is anyone aged seven or over who has held a savings account, FlexAccount or mortgage account with Nationwide Building Society for at least three months.

The big downside is that the amount you can put into the two-year bond is capped at £5,000 for a sole account and £10,000 for a joint account. Nationwide says this is to ensure that the benefits of a top interest rate are given to as many existing customers as possible.

It's a good product, but you can actually get just as good a rate from a two-year bond that isn't reserved for existing customers. The AA 2-year Fixed Rate Savings Account pays 3.8% and you can deposit any sum between £1 and £5 million!

If you fancy the AA account, you should move fast as there's a good chance that the deal won't be available for long. Read more in Top fixed rate savings bonds pulled after 30 days.

The Santander five-year fix

Hot on the heels of HSBC’s cheapest ever five-year fixed rate mortgage, Santander has matched the ground-breaking rate of 2.99% with a very similar offering.  

Like HSBC, Santander requires a hefty 40% deposit and carries similar fees of £1,495 to get access to the great rate but this deal, in contrast, is only available to loyal customers.

A Santander loyal customer is defined as someone who has had a current account with the bank for at least 30 days or someone who is an existing Santander or Alliance and Leicester mortgage customer looking to move home.

You might think there's no need to be loyal to Santander given that you can just as good a mortgage from HSBC.  And HSBC isn't bothered about where you have your current account.

However, remember that competition for the top mortgages can be fierce. So your chances of getting mortgage approval may be higher as a loyal Santander customer than if you apply to HSBC and have no previous relationship with that bank.

Santander isn't the only lender to offer exclusivity. Co-operative Bank, Lloyds TSB and Ulster Bank often offer cheaper rates or lower fees to existing customers and the same can sometimes be said of HSBC.

Rachel Springall from Moneyfacts confirms this trend is not uncommon as the lowest mortgage rates on the market tend to come from lenders who offer preferential rates for existing customers. But she also says that customers should still shop around.

Talk to one of our mortgage advisors to pin-point the best deal for you.

The HSBC balance transfer card

If you're looking to do a credit card balance transfer, you should focus on two things: the length of the 0% period and the size of the balance transfer.

When it comes to 0% periods, the market leader is the HSBC Visa card which offers a cracking 23-month interest-free period. This card is only available to existing HSBC customers. However, the card isn't as attractive as you might think because the balance transfer fee is on the high side at 3.3%

If you're willing to accept a slightly shorter 22-month 0% period, you'll only have to pay a 1.45% fee with the Barclaycard 22 Mth Platinum Visa card. Even better, this card isn't reserved for existing Barclays customers.

It seems to me that existing HSBC customers could benefit more from a Barclaycard deal as if they are truly loyal they probably already have an HSBC credit card with debt to transfer in the first place! In the world of balance transfer credit cards loyalty doesn’t pay, as you can’t transfer debt between the same lenders.

The first direct and HSBC regular savers

One area where loyalty definitely pays is regular saver accounts. These accounts normally pay you a high interest rate as long as you pay in a fixed sum every month.

The top regular saver accounts  come from first direct and HSBC and they both pay an inflation-busting 8% to existing customers.

The first direct account allows you to save up to £300 a month for 12 months paying a potential return of £156 before tax on the anniversary of opening the account. HSBC allows a maximum £250 a month to be deposited and will potentially pay £130.52 (or £97.89 if you're not a premium account holder) in interest before tax.

The next best option after these accounts is Cheshire Building Society's Platinum Monthly Saver account which pays 5%. Although it pays 3% less than HSBC and first  direct, the Cheshire account allows you to save a maximum of £6,000, that’s £2,400 more than first direct at a rate that is still quite impressive. Cheshire's account isn't reserved for existing customers.

The value of loyalty

Clearly there is some value to being a loyal customer but in a lot of situations there are better deals to be found elsewhere if you are prepared to shop around.

First direct is perhaps the one to watch out for as it only has products for existing customers and anyone who wants to benefit must be a 1st Account holder.

So in some situations loyalty counts, but in my opinion it's fairly cheap - with loyalty typically measured on a scale of between 30 days and three months in the accounts discussed above, meaning that anyone can become a loyal customer within a short period.

If you're thinking about switching about current account, loyalty deals should certainly be a factor in your decision, but  not that important a factor as there are still plenty of deals available that aren't reserved for existing customers. And whoever you switch to, you'll probably be able to benefit from new loyalty deals pretty quickly.

Take a look at our guide to switching current account stress-free here.

More stories on banking:

Should free banking be abolished?

Banking gimmicks are no bad thing

Say no to the big banks with the Bank of Dave

The Co-operative Bank to buy 632 Lloyds bank branches

Comments


Be the first to comment

Do you want to comment on this article? You need to be signed in for this feature

Copyright © lovemoney.com All rights reserved.