Customers urged to shun disloyal banks
Banks and building societies are increasingly using top-paying accounts to attract new savers, but existing, loyal savers are not being offered these good deals.
An example of this is the recently launched Citibank Flexible Saver Issue 5 – an internet, phone or postal account paying 2.48 per cent (3.1 per cent before tax). The rate includes a 1.68 per cent (2.1 per cent) bonus for the first year.
But this bonus is paid only to customers new to the bank rather than existing customers wanting to switch from another account. Some Citibank accounts pay as little as 0.32 per cent (0.4 per cent).
David Black, banking specialist at financial analysts Defaqto, says: ‘Introductory bonuses are routinely used to attract savers, but they are generally available to customers who have other accounts with the bank or building society. ’A growing number of accounts discriminate against existing customers.’ Halifax’s latest Guaranteed Saver Reward, launched last week, pays 2.08 per cent (2.6 per cent) fixed for a year and allows four withdrawals a year.
But under the bank’s rule of only one Reward account per customer, those already in older versions cannot open a new account at this rate. One version on offer earlier this year paid a much lower 1.4 per cent (1.75 per cent) fixed for a year. Others that ban existing savers from some of their good deals include Norwich & Peterborough and, on fixed-rate bonds, Stroud and Swindon. Santander group – Abbey, Bradford & Bingley and Alliance & Leicester – has also offered fixed-rate bonds in the past available only to those bringing new money to the bank.
Media urge revolt The Daily Mirror is urging readers to revolt over the unfair deals. In an article today Justin Harper writes: “Supermarkets scramble to reward loyalty with points and special deals. Airlines, coffee shops and even DIY chains know it makes sense to do all in their power to keep customers coming back. “By contrast, banks have long been in the habit of preserving their best savings rates and mortgage deals for new customers. In fact, it has been their policy for so long that Nationwide Building Society poked fun at it in a successful series of TV ads (right) with the pay-off line “New Customers Only!”
“However, some banks are beginning to see that this is crazy. “Why spend millions attracting new customers through the front door when loyal, existing ones are leaving in droves via the back door?”, he asks.
The good guys A few firms are now bucking the new customers only trend. Abbey has launched a new four-year mortgage deal which – unusually – is only open to customers who’ve held a current account with it for 12 months. Abbey said it designed the deal with existing customers in mind and it won’t be a one-off. It’s now looking at similar deals across its range. “It’s crucial we offer existing customers competitive deals,” says Nici Audhlam-Gardiner, director of Abbey mortgages. “We’re planning further additions to the range, to reward customers holding accounts and mortgages with us.”
There are a handful of other firms who reward its best customers. The Co-op has been rewarding loyalty for years within its supermarkets and financial services chain. It offers one point for every £20 borrowed on a Co-op Bank mortgage and one point for every £10 held in a Co-op or Smile current account or a point for every £5 spent on one of its credit cards. This year, each point is worth 2p. So a £50,000 outstanding balance would give you back £50 a year. Britannia Building Society, which is merging with The Co-op, also has a reward scheme for its loyal members. This will transfer over to The Co-op at the start of 2010.
Loyalty as an advertising message Nationwide has a long-running campaign on how bad banks are when it comes to rewarding loyalty. Not only does the UK’s biggest building society offer the same new products to both existing and new customers, it also rewards loyalty. A spokesman for Nationwide says: “Where some organisations will choose to offer new customers better rates or products, we think it’s important to provide existing customers with special deals to recognise their continued commitment to Nationwide.”
The Daily Mirror is suggesting that customers threaten to leave a financial services firm if they are not offered the same rate as new customers, even if it is for a mortgage. It warns readers to be particularly careful with the rates offered with savings accounts as these frequently change.