You can beat banks' existing customer deals

Banks frequently reserve the best rates on financial products for existing customers only. Does that mean you should let one bank provide all your accounts, cards and insurance policies?

The web has been a fantastic force for good over the last 15 years and I think that’s especially true when you look at the world of personal finance.

Before the internet, many folk would manage their financial affairs using only one or two banks or building societies. Your mortgage and savings account might be with your local building society while your current account and credit cards would probably be with the bank you joined when you were 18.

The arrival of financial comparison sites – such as lovemoney.com – has changed all that. Many folk now switch product providers on a regular basis and pick whichever product comes with the best deal. Customer loyalty is seemingly a thing of the past.

The banks don’t like it

This has been a welcome change but the banks don’t like it. They’d much rather operate in a world where they ‘owned’ the customer and the customer was loyal to one or two product providers. In that kind of world, the banks’ marketing costs would be lower and profits would rise.

So in an attempt to fight back, banks have started to offer special preferential deals for existing customers. They’re trying to bully you into becoming a one-bank customer.

For example, if you already have a mortgage with Santander and you switch your current account to the Spanish bank, you’ll get a £200 switching bonus. But if you don’t have a Santander mortgage and you switch your current account, you’ll only get a £100 bonus. You can find out more about this deal in Make £300 by switching current accounts.

With these kinds of deal on offer, you might think that it’s best to stick with just one or two providers.

So we thought it made sense to look at four different product areas and see which approach is best: loyalty or shopping around?

Credit cards

Let’s start with credit cards.

If you’re looking for a 0% purchases card, there’s no question that Nationwide’s Select card is top of the pile.

If you took out the card tomorrow and then bought an expensive holiday, you wouldn’t have to pay any interest on the resulting debt for 18 months.

Trouble is, the card is only available to Nationwide current account customers. So that’s a win for loyalty.

That said, the runner-ups aren’t far behind as there are three credit cards that offer 15-month 0% periods. Of the three, our favourite is the Tesco Clubcard MasterCard because it offers you extra Clubcard points - whenever and wherever you shop.

So when it comes to purchase cards, loyalty wins. But only by a short distance.

It’s a different story with balance transfer cards though. Loyalty’s best offer is the HSBC Visa card which gives you a 23-month 0% period for balance transfers. It’s a cracking card and is only available to existing HSBC current account customers.

However, most HSBC customers could get a better deal if they shopped around and went for Barclaycard’s 24-month Platinum Visa card which, as the name suggests, has a 24-month 0% period. So a definite win for shopping around! What's more, you'll also pay a slightly smaller transfer fee with the Barclaycard, at 3.2% compared to 3.3% with the HSBC card.

Loans

Moving onto personal loans, two of the best loans are reserved for existing customers only. HSBC has an existing customer loan at 6.2% while Nationwide offers a 6.3% rate to loyal users.

These are attractive rates, so you might think that loyalty is set to win here. But you’d be wrong as you can get even better rates if you shop around. M&S offers a personal loan with a 6% rate while Sainsbury’s and Tesco both offer 6.1%.

Just remember that not all successful applicants will be offered these rates and some folk won’t be offered a loan at all.

Current accounts

It’s a mixed picture when it comes to current accounts. We’ve already said that you’ll get a bigger switching bonus from Santander if you already have a mortgage with the Spanish bank.

But actually, the deal for existing customers is potentially even better than that. If you have both a Santander mortgage and at least £10,000 in a Santander savings account, you can get a £300 reward if you switch to Santander’s Preferred Current Account. The account also pays 5% interest on balances up to £2,500 for the first year you have the account – regardless of whether you’re an existing customer or not.

That might look like a clear victory for loyalty, but you can still get the 5% interest rate if you’re not an existing Santander customer and you’ll still get £100 for switching. So it’s not that big a victory.

What’s more, keen switchers can get a 6% rate from the HSBC Bank account and you don’t need to be an existing customer to get that deal. (Once again interest is paid on balances up to £2,500 for the first year you have the account.)

You also don’t need to be an existing customer to get a Halifax Reward current account. You’ll get a £100 switching bonus plus £5 for every month that you pay £1,000 into the account.

So if you shop around, you could get the Halifax or HSBC accounts or you could get the Santander account with a smaller reward than some existing customers.

We haven’t had space to look at all the different accounts and cards on the market, but we think the essential picture is pretty clear.

Yes, the banks are working harder to try and keep their existing customers and there are some good deals out there that reward loyalty. But if you’re the kind of person who likes to shop around, there are still plenty of cracking deals available. There’s no need to go back in time and be loyal to just one bank on your high street.

More: Get a 0% overdraft  |  You can beat Barclaycard's 24-month 0% card