Santander beaten by new 6% interest current account

There's a new market-leading current account to consider.

With less than a week to go until Christmas, HSBC has dropped an early present down the chimney of savers.

Yes, as part of its eighth annual sale, the bank has revealed a new market-leading current account offer for both new and existing HSBC customers. The new deal boasts a better return on your cash than Santander’s 5% account – as well as a 0% overdraft.

6% interest and 0% overdraft

HSBC’s offer applies to three of the bank’s existing accounts: the HSBC Bank Account, Advance Account and Premier Account. Both new customers and existing customers that have not already used HSBC’s switching form service are eligible.

The offer boasts 6% interest gross for 12 months on balances up to £2,500. Only one account per customer may receive the offer. The interest levels revert back to the standard rates after this 12 month period.

The offer also includes a 12 month 0% overdraft. The overdraft you receive will depend on the HSBC account you opt for as well as your own credit history. The maximum overdraft for the HSBC Bank Account and Advance Account is £5,000 while the Premier Account has a limit of £10,000.

After this 12 month period the standard overdraft rate applies. This is currently 19.9% for the HSBC Bank Account, 17.9% for the Advance and 11.9% for Premier.

Requirements

The offer is available to all new customers who open a HSBC Bank Account, Advance Account or Premier Account using the ‘Switching your personal account to HSBC’ form. Existing customers who have not previously submitted a ‘Switching your personal account to HSBC’ form and hold one of these three accounts are also eligible. However they will have to switch using the HSBC form. This could mean opening a new account or switching their existing one.

Customers must transfer a minimum of two direct debits and/or standing orders as part of the switching process.

Other funding requirements depend on the HSBC account you go for. The HSBC Bank Account has a £500 minimum turnover requirement per month and no fees.

The Advance account has a £9.95 fee per month (reduced from £12.95 for the sale period), while to be eligible for the Premier account you must have savings or investments of at least £50,000 with HSBC, an individual annual income of at least £100,000 paid into the Premier account and either an HSBC mortgage of at least £300,000 or a further HSBC product taken out through the bank’s independent financial advice service (excluding mortgage-related insurance).

You are able to access the offers through branches and over the phone.

As with HSBC’s sale credit card offering a whopping 23 months 0% on balance transfers, this current account will only be on-sale until 31st January 2012.

So how do the competitors stack up against this new account?

Santander

The next best account to HSBC’s 6% whopper is the Santander Preferred Current Account. This deal offers a 12-month interest-free overdraft up to £5,000 matched to your previous limit, though the level you receive will be dependent on your credit circumstances.

The Preferred Account pays 5% AER for 12 months on balances up to £2,500. Santander also allows you to hold two accounts at once, meaning that you could earn a total of 5% AER on £5,000 – that’s a cool £200 of interest in just one year.

The bank also offers a range of cashback rewards for switchers. All new customers who switch to the Preferred Account will receive £100 in cashback. If you hold a Santander mortgage (and are not in arrears) this figures jumps to £200. And if you hold £10,000 or more in savings as well as a mortgage with the bank you’ll get £300 of cashback.

However you will have to jump through several hoops to qualify for this deal. The account has to be funded by at least £1,000 each month. You’ll also have to switch to the account online, transfer over all of your standing orders and direct debits and have at least two paid from your new account within 13 weeks of opening it.

But as regular readers will know, Santander does have something of a murky customer service record. The bank frequently emerges towards the bottom of customer satisfaction polls and is often slated by lovemoney.com users for its shoddy service. That said, Santander has pledged to spruce up its customer service by investing in staff numbers and moving call centres back to Britain.

But there are still alternatives to both Santander and HSBC.

Alternative deals

First Direct’s 1st Account often emerges as something of a ‘people’s choice’ when it comes to current accounts. The bank – part of HSBC – consistently emerges at the top of customer service polls and frequently wins praise among lovemoney.com readers.

The account pays no in-credit interest but does offer a fee-free £250 overdraft. New switchers will also be paid £100 when they join the bank and a further £100 if you decide to leave within six months.

However the funding requirements for the 1st Account are relatively lofty. You’ll need to pay at least £1,500 into the account every month and switch over your standing orders and direct debits using the bank’s Easyswitch service.

Another alternative is Halifax’s Reward deal. The account offers no interest-free overdraft or in-credit interest but does pay a £5 reward every month you deposit £1,000 into the account.

The Co-operative Bank’s Current Account Plus is a better option if you’re after an overdraft facility but need a lower funding limit. The deal offers a fee-free £200 overdraft and you’ll only need to pay in £800 each month.

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