New or existing customers: Who gets the best deal?

Is it better to be a new customer or an old faithful? Serena Cowdy investigates.

You (lovemoney.com readers) often let us know that you're unable to take advantage of certain financial products because you're not 'new customers'.

I've experienced this frustration myself: You come across a new 'top' savings or bank account which offers you just the combination of features you want. You can't apply for it, though because you already have a (not-so-good) deal with the same provider.

However, it seems the pendulum does swing both ways. Many of the best deals currently on the market are actually available to existing customers only!

When new customers get the best deals

Here are some of the cracking products around at the moment that only 'new customers' can apply for:

The Flexible Saver Issue 6 from Citibank: This instant access savings account offers a market-leading rate of 3.3% AER (including a 2.25% fixed bonus for the first year). But unfortunately, if you already have a savings account with Citibank, you'll have to look elsewhere.

The Savings Account from ING Direct: This is another great instant access account, offering a rate of 3.2% AER guaranteed for one year. However - yet again - it's only available to new ING savings customers.

The 1st Account from First Direct: This current account gives you a £100 bonus for signing up (which you'll get after depositing at least £1,500 for at least three months). It will even give you another £100 if you switch away from 1st Direct within a year - as long as you've maintained the minimum £1,500 monthly deposits. The biggest catch (of course!) is that it's available to new First Direct customers only.

Credit cards: You generally can't apply for any credit cards that come from the same 'stable' as ones you already have. So for example, you wouldn't be able to have Abbey and Alliance & Leicester cards as they're both provided by Santander.

Can loyalty pay?

However, there is a flip side to this coin. There are also many excellent products which are only available to existing customers - or those who are willing to tie themselves to other products from the same provider.

Here are some great products that come with that particular nasty catch:

Personal loan from Nationwide: This offers a typical rate of 7.9% APR for loans of £7,500 to £14,999, for up to five years. This is one of the lowest rates currently available. However, you will only be able to take out this loan if you already have a FlexAccount with Nationwide.

HSBC credit card: This card has a good balance transfer offer; you'll pay 0% interest on balance transfers for a juicy 15 months (with a 2.9% transfer fee). The bad news is that to be eligible for this offer, you already need to have a current account with HSBC.

1 Year Fixed Rate Websaver from Halifax: If you're looking for a savings bond you can operate online, this might fit the bill: The 1 Year Fixed Rate Websaver pays a decent 3.5% (fixed) on balances over £500. However, to get that rate you'll have to open a variable rate Halifax Web Saver account first. And when your fixed term ends, your savings will be transferred into it.

If you happen to be an existing customers at one of these banks, good for you. But it's pretty annoying for everyone else. Take a look at our recent video on Why existing customers only deals aren't fair.

What can you do about it?

If you really want to take advantage of a 'new customers only' product, you might be able to sneak in the back door, but success isn't guaranteed and it can end up being more trouble than it's worth.

In a nutshell, you'll have to withdraw your money (and your business) from the provider you want to target, and temporarily stick it elsewhere. You'll then have to go back to the provider in question and try to apply in your capacity as a 'new customer'.

As I said, this doesn't always work, and it can cause you a lot of hassle. It's also worth checking whether there are any rules specifically related to this sort of action; certain providers, for example, specify that you can't have had any similar products with them for the previous three months.

It doesn't pay to be tied down

If, on the other hand, you need to take out another, linked product to get the deal you want - be very wary.

Many of the juiciest offers have relatively short shelf lives - like great savings rates that last no longer than a year. Making a long-term commitment to a linked product (like an investment plan) seems a very big price to pay for that relatively small gain.

In fact, the negative financial consequences of rubbish 'add-on' products can soon outweigh the benefits of the product you really wanted.

You may find you're able to close down your 'compulsory' product as soon as the one you really want is up and running. However, make absolutely sure you're allowed to do this before you sign on the dotted line.

Nine times out of ten I choose products that don't tie me to any others. When it comes to personal finance, loyalty to particular institutions very rarely pays off!

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