Why You Should Cheat On Your Bank

Loyalty to your bank could cost you an arm and a leg - find out why sometimes, it's time to say goodbye.

This article was originally sent to Fools as part of our 'Good, Bad and the Ugly' email series. 

As part of our ongoing 'The Good, The Bad and The Ugly' rundown, I'm going to have a look at an ugly practice that several Fool readers have recently complained about: the preferential treatment of new customers.

We all like to think loyalty is rewarded, but when it comes to savings, current accounts and other financial products, it seems this often isn't the case.

I'm constantly coming across 'introductory' packages used by banks and building societies to entice new customers - but when's the last time you were rewarded for sticking with an institution for years, or even decades?

Here are just a few examples of what I mean:

Abbey - the eSaver direct account

Earlier this month, Abbey increased the interest rate paid on its eSaver Direct account to 6.5% - one of the best rates on the high street. Good news, eh?

The catch is that the new rate is only available to customers depositing money 'not previously held by Abbey'. Ah.

This means that existing Abbey customers can benefit - but only if they bring in new money from elsewhere - because they can't transfer funds from other Abbey accounts. Boo hiss.

Technically, existing customers could try moving their funds out of Abbey - then moving them back to get the higher rate.

But why should loyal customers have to go through this kind of hassle?

It might be Abbey's way of making sure it doesn't have to pay out as much interest - because most of these customers probably won't go to all that bother. Terribly cynical I know...

Alliance & Leicester - certain current accounts

A&L recently announced it would be increasing the interest rate paid on its Premier Direct and Premier 50 current accounts to a juicy 8.5%. Hurrah!

What's more, with these deals you don't have to bring in money from elsewhere.

But hang on - they're only for those people who don't already have those accounts.

That means if you're already a Premier Direct account holder, you'll continue to be paid the current rate of 6.5% interest.

Disgruntled yet?

Tesco Personal Finance - all sorts of products!

In recent weeks Tesco Personal Finance has offered new customers all sorts of incentives to join it. Those already with the provider, however, seem to have drawn the short straw.

Tesco Health Insurance is currently offering new customers a full year's cover for the price of nine months (no such luck for those already on the scheme).

Tesco Home Insurance recently offered new customers a 75 discount on Hotpoint appliances ordered from Tesco Direct (loyal customers? No cheap washing machine for you!)

And Tesco Car Breakdown Cover is offering new customers 30% off the premium for the first year (again, existing customers pay full price).

So what should you do?

If we're Foolish, we can, of course, exploit the situation. As always, shopping around will mean you end up as that new customer getting the best deal - rather than the loyal follower left behind.

Look at the home insurance industry. Home insurers often whack up prices on renewal, by up to 35% or even more.

So doing your research properly - and switching - could save you hundreds of pounds every year.

A combination of loyalty and apathy means that millions of us pay way over the odds for financial products.

But then loyalty's a funny thing. I don't like to think that a relationship I've had for 20 years means diddley-squat.

Do you remember the first piggy bank you ever had? I do - and it was bank-branded.