Buying a Bank Account

19 February 2013

No matter how many fivers your Gran has stuffed in her mattress, and whether your cash is ultimately safer there, it is a fact of modern life that you need a bank account just to be able to exist nowadays. Even if you have a bank account, chances are that you have had the same account for years, because it’s just too much hassle to change it. And too costly if something goes wrong with the switch.

But perhaps you are ready for a change, perhaps your bank is encouraging you to ‘upgrade’ to a paid-for bank accounts, or perhaps you just want to see what you can get with your money. Is buying a bank account worth it?

Basic ‘free’ accounts

Time was, every bank account was free and it was only the posh nobs with their gold cards who would pay for the privilege of playing golf with their bank manager. However, knowing banks as we do, even in those halcyon days, is t likely that they were actually giving you something for nothing? Did the banks forget to make profits back then? Of course they didn’t.

Nowadays, however, the illusion is more transparent. Banks are keener to get people paying them to look after their money and they are far more upfront about the ‘hidden costs’ of a free account. Not only do paid-for accounts give you free travel insurance, you also get preferential rates on your banking services.

So does that mean a free account is always going to end up costing you more in the long run? Not necessarily.

Is it worth paying for it?

The simple answer is that it depends. Different accounts offer different incentives on their paid accounts and you need to look at what’s on offer and work out whether your personal circumstances would leave you better off paying a monthly fee.

Take HSBC as an example. Their basic bank account is free, and their Advance account costs £12.95 a month. Neither account offers credit interest, but the Advance account offers worldwide travel insurance, free motor breakdown cover and a 2% AER reduction in overdraft rate. So far so not very exciting.

However, possession of an Advance account also offers upto 10% cashback on personal loan interest, preferential savings account rates (up to 6% for a regular saver account) and £200 off a mortgage arrangement fee. If you are in a position to take advantage of these offers it may be worth the minimum (12 month) charge of £155.40.

If you have a modest overdraft, few savings and no need for additional borrowing, however, free might be the way to go.

Other accounts will have different offers to tempt you into buying an account. Santander’s 123 account is an interesting prospect, where for £2 a month, you could get 1%, 2% or 3% cashback on the bills that you were going to have to pay anyway. And they pay interest on balances over £1000.

Again, you need to do the maths, or at least find the right numbers and put them in this handy calculator.

Making the deal even sweeter

So. You’ve decided you want to change bank account, and  you may even have worked out you’d be better off paying for it. Why not feel even more satisfied with yourself by getting a switching or cashback reward.

Both First Direct and Halifax will give you £100 when you switch,  but only Halifax pay you £5 a month (net of £1.25 tax) whether you have any money in your account or not; you just need to have paid in £1,000 a month. The Halifax Reward account doesn’t charge , and the First Direct 1st account normally costs £10 a month, but if you pay in £1,500 a month, they’ll waive the charge, just for you. Santander 123 are also currently offering to waive the first year’s fees (worth £24) when you switch.

But if there are no switcher fees, don’t worry, because you might be able to get cashback. For example, you can get £45 cashback switching to the Santander 123 account with Quidco, or an ever massiver £55.55 with TopCashback (until Saturday).

So beat your bank to the calculator and put your money where it benefits you most.

TOPICS:   Banking   Economy


  • M4RKM
    Terminology is incorrect. Barclays and Co-Op offer Basic Bank Accounts, so you don't get credit scored, and don't get some features such as overdrafts, whereas HSBC offer a "Bank Account" which is totally different to a "Basic Bank Account", as you're allowed an overdraft.
  • Mad H.
    ^This. 'Basic' bank accounts and 'free' bank accounts are two separate things
  • Sicknote
    I have a Natwest Black account and that's not because I'm a useless, feckless, out-of-work. non-swimming sub Saharan. It's because it gives me license to call my back [Natwest] 24/7 and shout at some underpaid, over reaching graduate tosser about how much money is in my account.
  • Buying C.
    [...] Buying a Bank Account [...]
  • hammertime
    Fk all of the banks and their scummy credit agency friends-living via stealth/cash is best for all.
  • Emilia M.
    may u hold my money
  • Emilia M.
    extreme trust

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