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Staff Writer
20 January 2010
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THE current trend for banks to shower their existing customers with offers is not necessarily in the customer's best interests, a leading financial analyst has warned.
According to financial information group Defaqto, the practice is now widespread and those providing credit cards are some of the worst offenders.
Financial One Stop Shop
Halifax Building Society has become the latest financial institution to join the ranks of the big high street banks and building societies offering special mortgage deals solely to their current account customers.
Nationwide is already offering its current account holders special mortgage deals ranging from free valuations and cash-back options, to preferential rates and the chance to borrow a higher proportion of a property's value.
RBS, Natwest and HSBC credit cards are also only currently available to the banks' existing current account holders.
According to David Black, a banking specialist at Defaqto: "Banks see the current account as the main relationship builder with the customer and it also enables them to have a much better understanding of the financial capabilities of each customer.
"The cross-selling of other products on to the existing customer base is destined to become the key battleground as each bank strives to become the one-stop shop for all the personal finance needs of their customers," he added.
Introductory Offers
By focusing on selling products to existing customers whose finances they know more about, banks can play it safe in terms of potential risk. They can also remove the increasing trend for customers to shop around for better deals on price comparison sites like this one.
That the banks are concerned about people getting better deals elsewhere suggests that it's an activity well worth pursuing. Indeed, Black himself advises it.
"If you have a good credit rating you're much better off not being loyal to anyone, because of all the introductory offers around," he said.
Various credit card providers are making tantalising offers this January and existing credit card holders would be wise to sit up and take notice of them.
Customers who frequently switch providers get the best rewards because special offers are designed to entice new customers rather than reward loyalty.
0% Interest Rates
Many offers typically include 0% on purchases or special rates for balance transfers. The Virgin credit card is currently offering 0% balance transfers for 16 months - making it the only credit card in the UK to offer a 0% promotional period of this length. Whenever you apply for the card you're guaranteed the full 16 months.
Some providers also offer cash back on purchases for a set period of time. For instance, the American Express platinum cash back credit card offers five per cent cash back up to £100 during the first three months.
The Egg credit card meanwhile enables consumers to earn up to 10% cash-back and receive up to 25% off shopping discounts when they shop online with selected retailers.
And it's not just credit cards that should see consumers getting the price comparison bug.
The same advice applies to savings accounts, Black said, where customers should shop around for the highest interest rate and lowest overdraft fees.
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