Get £100 & Free Travel Insurance With This Account!
Neil Faulkner reviews the latest current account on the market. Is it worth the Web page it's written on?
I wrote last year about First Direct's account that paid £100 for joining and, humorously, £100 if you closed your current account. Now it is just offering £100 if you close your account and all other products with them within 12 months of opening.
First Direct is clearly confident in its services and the bank does indeed get good feedback from Fool users, but rate tarts must be laughing. And it's time for you guys to consider switching again, because Alliance & Leicester is offering its own big incentive deal of £100 for opening its Premier Current Account. If you're recommended by a friend who's an A&L customer, you both get an extra £25, too.
So, to the small print of the deal. To get the £100 you can't be an existing A&L current-account customer. You must use A&L's switching service to transfer all your direct debits from your existing account. You must be over 21 and you must pay in at least £500pm. You must maintain the £500 payment for at least 15 weeks, and then A&L will pay you the joining bonus.
That's all very good, but we must consider the other terms of the account. You get just 1% AER interest on balances up to £2,500. Any excess over that gets 0.1%. This doesn't compare well with other top current accounts. On the other hand, you're guaranteed to get your £100, whereas most other current accounts can reduce their interest rates at any time.
The `typical' overdraft rate is 0%. `Typical' means that 2/3s of the customers who A&L agrees can have an overdraft will pay no interest. However, after 12 months you will have to start paying a fee to use your overdraft. (50p per day, capped at £5pm.) A&L will try to match your existing overdraft limit up to a maximum of £2,500.
A linked savings account
There is a linked instant-access savings account, PlusSaver, that is opened automatically. It pays 5.25% AER on savings up to £50,000, and 4.5% on the excess. This interest rate isn't the best and it can be reduced at any time, so it's not for me. However, many readers have expressed a preference for getting a savings account that's linked to a current account, because you can transfer money between them so rapidly. They feel the convenience is worth the reduction in interest. So it's your call.
Other linked products
You get offered a credit card if you pass the credit test. Its balance-transfer deal of 12 months and a 3% fee is OK, but you should compare deals.
You get access to what A&L calls Premier Rewards, which is basically some of their other products like home insurance. However, you will almost certainly get better value-for-money buying the same products elsewhere, so shop around.
The account also comes with free annual multi-trip European travel insurance if you're 64 or under. I've looked through the small print and the policy is fine. It's a valuable little bonus worth £60 according to A&L, and about £25 by my independent estimate. It doesn't include winter sports, family cover or other extras as standard, but Alliance & Leicester says you can pay to upgrade it.
Unfortunately I must mention customer service in relation to A&L because it consistently receives the worst criticism for customer service from users of this website. That has to go down as a negative point on an otherwise very good offer.
How does this account compare?
Going back to pure financial terms, I think the Premier Current Account is pretty much the best you can get right now if you're in credit. Its main competitor is, in fact, another A&L account: the Premier Direct Current Account. (They've just inserted the word `Direct', but both accounts are equally direct.) This second account doesn't pay a joining fee, but it does pay 8.5% AER before tax, and that's fixed for a year.
Which is better? It depends how much money you pay into your account each month, and how quickly it leaves. As a rough rule, basic-rate taxpayers will be better off with the account paying 8.5% if you still have at least £1,700 in your account 15 days after payday. Higher-rate tax payers will probably be better off with that account if they've got at least £2,250 in their accounts 15 days after payday.
Those calculations are assuming your money goes down fairly gradually throughout the course of a month. The more payments that are left till just before your next payday, the more likely it is that the 8.5% interest account will be better for you.
I've also based my calculations on the assumption you can't be bothered to switch again for 12 months. If you switch again after 15 weeks (when you've received your £100) you'll probably be vastly better off with the £100 and the Premier Current Account. Don't forget the insurance linked to that account also has value, provided you're holidaying in Europe.
Two more tips
Perhaps, if you were to switch after 15 weeks, A&L will continue to let you keep the 0% overdraft. You could, therefore, borrow for free and move money to a top, instant access savings account, making money for nothing! Be wary of the small print when doing this though; A&L may cancel your interest-free rate, or even your entire overdraft facility, if you stop paying in £500pm.
If you frequently have more than £2,500 in either of these accounts, you should transfer the excess to other accounts, because you'll receive just 0.1% interest on it.
Here's the small print
If you're like me, you don't get interested in a product until you've read all the small print. The darn annoying thing about that is you don't normally get to see the small print till you've filled in a dozen pages of your personal details online. Since I've done that to research this article anyway, here's a sneaky shortcut link to A&L's Premier Current Account T&Cs.
I always find these comparison articles boring to write, and boring to read unless I happen to be looking for that product at that time. But I do hope it's been useful for those of you looking for a new current account or an easy £100!
> Compare current accounts via Fool.co.uk