'Plus' account to boost competition

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%VIRTUAL-SkimlinksPromo%Competition to attract current account customers and savers scouring for better returns is being ramped up as a new product paying 5% interest is set to be launched.

Experts said the returns on the first new account to be offered by TSB since its relaunch last autumn beat much of what is on offer in the savings market.
The new "plus" current account will give customers an interest rate of 5% on balances up to £2,000, has no monthly fee and requires minimum monthly deposits of £500.

Up to two of these accounts can be held per person, so in theory someone could have two accounts, each with £2,000 in them earning 5% interest.

People are not required to hold the new product as their main current account as TSB wants to encourage them to try out the brand.

Applicants will need to go "paperless" in terms of their statements and correspondence and will also need to register for internet banking to get the 5% rate. The money saved by doing this is helping TSB to offer its relatively high level of return.

Customers will still be able to manage the account in branch and over the phone as well as online.

The new account is open to both new and existing TSB customers and it will be available online and over the phone from March 30 and in branch from the following day.

Five years of ultra-low interest rates have given savers a tough time trying to find any accounts that give them real returns.

Comparing the new current account to what is available in the savings market, the top-paying easy access account currently pays a rate of 1.50% and is being offered by Britannia, according to the
"best buy" tables of financial information website Moneyfacts.

Building society Nationwide also offers a current account with a 5% interest rate on balances up to £2,500, but the rate on the FlexDirect account reverts to 1% after 12 months.

Rachel Springall, spokeswoman for Moneyfacts, said the interest rate offered on the new TSB account is likely to "cause a stir".

She said: "The account is very straightforward and is likely to attract not only banking customers after a fee-free account, but also savers who want to make the most of their money."

Ms Springall suggested some Nationwide customers nearing the end of their 5% bonus rate may be tempted to consider TSB.

She said: "They could keep earning 5% on their deposits, beating most savings accounts out there today."

The overdraft on the new TSB account has a £10 fee-free buffer and a rate of 19.94% after that. Switchers will get a fee-free overdraft for the first three months.

TSB reappeared on the high street last September as a standalone brand for the first time in 18 years after parent Lloyds Banking Group was forced to ditch 631 branches under European rules on state aid.

The bank's chief executive Paul Pester recently said he was "not surprised" some of its customers are upset after it recently came bottom in a customer satisfaction survey by consumer help website MoneySavingExpert.

The bank, which has suffered from some high-profile technical problems since splitting from Lloyds last September, has set itself "a mission to deliver the best customer experience in banking".

Competition between banks and building societies has been hotting up since the launch of a new customer guarantee last September which makes it easier for people to ditch their old current account provider and switch to a new one.

The guarantee has cut the length of time it takes to switch to up to seven working days and outgoing and incoming payments are automatically swapped over to the new account.

Marks & Spencer recently announced that it plans to launch its first "free" current account this summer, which will offer consumers a £100 gift voucher to switch to it as well as loyalty points which they can spend in its stores and an automatic £500 overdraft, the first £100 of which is interest free.

10 things your bank doesn't want you to know
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'Plus' account to boost competition
Once you have opened a current account with a bank or other lender, you will get a steady flow of emails, letters (and maybe phone calls) offering you a savings account, loan, mortgage, ISA etc to go with it. But while it may be tempting to have everything in one place, it's better to do the legwork and shop around for the best financial products. You can compare interest rates on loans and savings accounts in the 'best buy' tables in the newspapers, or look online on comparison sites. Remember you can still easily transfer your money between accounts, even if they are not with the same financial institution. 
Whether you want to apply for a new mortgage or refinance an existing one, your bank will probably be very happy to give you an instant quote in the hope that you will go with them. They may not tell you that you can shop around at other lenders. A mortgage broker can give you an overview of the best interest rates on offer, and might be able to cut you an even better deal him/herself. 

Want to cash in your jars of change that are sitting on your shelves at home? Many banks are not very keen on coins. They often only take it from their own customers. You will have to sort it into different denominations and put the coins in the bank's bags in set amounts (for example, £1 for coppers, £5 for silver, etc). Some banks only take a limited number of bags a day, or won't take any at busy times. Others take a different view: HSBC has free coin deposit machines in many larger branches where you pour your jar of coins into the machine and it counts them and automatically credits your account. Barclays, NatWest and RBS also have machines in large branches in city centres.

Bank employees now have a duty to point out that they only advise on the bank's products and don't offer independent financial advice. What they won't tell you is that even the advice they give you about the bank's own products should be treated cautiously. Bank staff are often undertrained, underpaid and overworked. (You could ask for the employee's qualifications before getting advice.) So do your own research and/or find an independent financial adviser.

Nothing is set in stone. Your bank won't tell you this, but sometimes it will waive a fee, for example an overdraft or an ATM fee, depending on the circumstances. You have nothing to lose by asking, if you can argue persuasively why they should waive the fee. Citizens Advice says your bank should treat you sympathetically if you can show financial hardship.

As stated in the previous slide, some things are negotiable – such as interest rates or waiving fees – if you can make a good case for it. In that instance, talking to an employee in person is better than filling in a form online.

If your account is overdrawn and you get paid, your bank could use this money to pay off your overdraft without your permission. However, you have a right to ask them not to do this so you can pay your rent or mortgage first. This is called first right of appropriation. You have to ask your bank in writing, and you'll need to write to them with new instructions every time money gets paid into your account. Make sure you write 'first right of appropriation' in your letter.

If money is mistakenly credited to your account, your bank or building society can recover the money, assuming they do this within a reasonable time. But you may be allowed to keep the money, for example if you didn't realise the bank had made a mistake and spent the money in good faith. You would have to prove that you spent it in such a way that it would be unfair to ask you to pay it back. You can complain to the Financial Ombudsman if you think your lender is being unfair in asking you to repay the money.

If you do have to pay it back, you could try to reach an agreement with your bank to pay it back in instalments without interest being added.

The Financial Ombudsman Service has more advice on what happens when payments have been credited to the wrong account. If you did something wrong - for example, by entering the wrong account number - rather than the bank, the Financial Ombudsman may still uphold your complaint. They consider whether the financial institution made it clear to the consumer that only the bank sort code and account number are used to process the payment, rather than the name of the payee. They will also ask whether the lender should have realised that the consumer had made mistake, and once the problem came to light, did the firm take reasonable steps to try to get the money back from the recipient.

If too much is deducted from your account, your lender may have to refund the full amount of the payment. For example, if the money is taken through a direct debit or credit card payment for a hotel room or car rental. When deciding whether the debit was reasonable, the bank or building society will take into account your previous spending pattern. But the bank doesn't have to refund the payment if you agreed the amount beforehand or were informed of the payment by your lender at least four weeks before.

If you don't have enough money in your account to cover a direct debit payment, your bank may not make the payment. It doesn't have to tell you that the payment hasn't been made, so the onus is on you to keep checking your account. If, on the other hand, the payment goes through, you may be charged for an unauthorised overdraft.


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