Abbey strengthens current account offering

Mike Naylor, personal finance expert at uSwitch.com, the independent online price comparison and switching service, comments on Abbey’s move to strengthen its current account offering with a 0% overdraft for 12 months: “The new offering from Abbey, hot on the heels of Alliance & Leicester who earlier in the year made improvements to its current account, is further evidence that the competition on the high street is hotting up. Customers of the big five banks should sit up and take note. People need strong incentives to switch their current accounts, and providers such as Abbey and Alliance & Leicester are giving them just that.

“Abbey’s offering of a 0% overdraft for 12 months, reverting to a standard rate of 12.9% EAR, is very competitive and puts them in line with Alliance & Leicester’s offering of a 0% overdraft for 12 months, reverting to a 50p per day charge (maximum £5 per month) thereafter. As many people rely on their overdraft facility, competitive propositions such as these may help shake up the current account market and encourage people to switch accounts.

“On the flipside, customers who are in-credit are offered good deals by both Abbey and Alliance and Leicester too. Last year Abbey introduced an in-credit rate of 8% AER for switchers to its preferred in-credit rate account for balances of up to £2,500 in the first year and reverting to 2.5% AER thereafter. This move was echoed at the beginning of 2008 by Alliance & Leicester’s decision to increase rates on the Premier Direct Account to 8.5% AER reverting to a highly competitive 4.5% AER after the first year.

“Abbey’s changes suit customers at both ends of the spectrum, whether they are making regular use of their overdraft, benefiting from the high interest on in-credit balances or even just dipping in and out of their overdraft. The only condition is that the customer must pay £1,000 per month into the account. With many banks now offering competitive rates for a range of circumstances, it’s more important now than ever that customers take a close look at their existing current account offering and consider switching to get a much better deal.”