The sexiest bank account in Britain

Could a current account that pays zero interest be the best in Britain? Find out which bank we're talking about - and why we think it's so good!

Here at lovemoney.com, we often used to write articles praising Santander for offering a market-leading rate on their current account – 5% on balances up to £2,500, as long as you pay in £1,000 a month.

But whenever we did, readers like you would post dozens of negative comments about Santander, and how the bank's service often falls well short of the mark.

This in turn made us think that when it comes to choosing a bank, rates don’t always rule.

After all, often you don't have a grasp of how good your bank is until something goes wrong. By that time, things are probably well out of hand, and you could be left sorting out a mess with an incompetent bank – or worse, one you feel simply doesn't care.

So, in an effort to redress the balance, we want to look at another bank which gets lovemoney.com readers talking – this time, for all the right reasons.

That bank is First Direct.

You may find this strange. While other banks  attempt to reel you in with tasty rates, First Direct doesn't bother, offering zero interest on its current accounts. 

But this bank has been widely praised by lovemoney.com readers for its efficient service. So, when it comes to day-to-day banking, is it simply the case that high interest rates aren’t sexy anymore?

First impressions?

It’s not been all rosy at First Direct, and on first glance, you could be forgiven for thinking that we’re talking about a different bank altogether.

For example, First Direct once hit the headlines for all the wrong reasons after announcing that it was to charge all customers who didn’t pay at least £1,500 a month into their current account a monthly fee of £10. (You can also avoid the fee by taking out another First Direct product, such as insurance, a loan or a savings account).

As if that wasn’t enough, they then announced that they were no longer going to pay interest on their current accounts.

Bearing this in mind, you may think that opting for an account which pays a higher rate of interest, such as the juicy 5% you’d get with Santander or the 4% you’d get with a Lloyds TSB Vantage account, would be the better option. In addition, you only have to pay in a minimum balance of £1,000 to qualify for these accounts.

However, as you may have already guessed, those who bank with First Direct don’t usually do so for the monetary gains.

Reputation over rates

Time and time again, First Direct has been praised for its quick, efficient service, with people, not machines at the end of the telephone 24 hours a day – even on Christmas Day.

Indeed, this bank is so attractive to its customers, they actually get quite passionate talking about it.

Here are just a couple of examples of praise from lovemoney.com readers about First Direct:

kevinoprey said: “I took out a Firstdirect account in 1990 and never regretted it.  They are great people to deal with and I've always enjoyed fantastic service - streets ahead of the other banks I used prior to 1990.  Simply the best choice I ever made.”

rach620549 said: “I LOVE first direct. There seems to be nothing they can't do for you. Friendly, helpful staff, easy to use online banking, so on and so on. I tried A&L a couple of years ago and their system was so complicated I ended up leaving because I couldn't stand the hassle. I wouldn't leave first direct.”

Declarations of love from lovemoney.com readers, but, if we’re purely talking numbers, First Direct comes up with some pretty sexy ones here too.

A welcome boost

As a welcome present, First Direct will give you a £100 when you switch over and pay in at least £1,500 a month to its 1st current account. In fact, they are so confident you’ll like them that, if after six months you’re not satisfied, they’ll give you another £100 for the pleasure of leaving.

And, despite not paying any interest on their current account, it’s not much worse than the derisory interest rates paid by other banks. In fact, 48% of accounts pay nothing at all, according to Moneyfacts. Read Ditch these current accounts quick to find out  whether your existing current account is one of them.

Here are some of the other benefits of banking with First Direct:

• The 1st Account comes with a £250 interest-free overdraft. Any agreed overdraft used above this level is charged at 15.9% which although isn’t cheap, is still lower than the big four’s standard overdraft rates.
• One of the best features of the 1st Account in my opinion is the ability to make CHAPS (same day transfers within the UK) and international money transfers over the phone. If you’re somebody who uses these services regularly, you probably know how annoying it can be to have to constantly go into a branch and stand in an endless queue. With First Direct, the whole transaction can be done over the phone, making it much more convenient.
• First Direct also provides a handy sweep facility, allowing you to automatically move any extra money from your non-interest paying current account to an account which rewards you better.
• They also allow you to offset your mortgage against your current account and any savings you have, which could potentially shave hundreds off your monthly payments.

Finally, if you are thinking of switching, although we think First Direct’s non-interest bearing current account has benefits which outweigh the loss of interest, other products such as its savings accounts are not so competitive.

For example, while First Direct’s Fixed Rate Saver Account pays a reasonable 3% AER, if you don’t want to lock your money away for a year, your only option is the Everyday e-saver, which pays only 1%. You can get better instant access savings accounts, such as the AA’s Internet Extra account at 2.8% or ING Direct’s Savings Account at 2.75%.

So, while First Direct may be a good banking alternative, their products will not be for everyone. If you have predictable banking habits or simply want a bit of extra dosh, then perhaps a high-interest current account might be better for you.

And perhaps we’re wrong about First Direct's efficient service. Let us know by posting your comments below!

More: The banks you complained about more this year  | Three ways to get rid of your overdraft for good!
Compare current accounts at lovemoney.com