First Direct, a division of HSBC, is planning to reshape its current account and savings products to help customers earn more money on their savings accounts.
First Direct is planning to stop paying interest on its current accounts and instead reinvest it to give customers a better deal on savings and overdrafts.
First Direct currently has two current accounts, Cheque Account and Bank Account, which pay 0.10% and 2% AER, respectively. Its customers are split evenly between the two accounts. First Direct will merge these accounts into the 1st Account. The new account will not pay credit interest but in return the bank will offer a new no-strings instant access savings account, called Everyday e-Saver, which pays 5.5% AER.
Customers can set up an automatic monthly sweep to move money from their 1st Account to their Everyday e-Saver, to increase the amount they earn from their savings. The bank will also offer a new regular savings account paying 8% AER fixed for a year. Customers can save between GBP25 and GBP300 a month, which is GBP50 a month and GBP600 a year more than most other providers allow.
The bank is introducing a new incentive to customers joining the bank. Any new customer opening a 1st Account from November 1, 2007 who is not wholly satisfied after six months can claim GBP100.
Chris Pilling, First Direct’s chief executive, said: A staggering 96% of our customers told us that credit interest wasn’t an important factor in choosing to bank with first direct. And almost 70% didn’t know the rate of interest on their current account. They were far more interested in our exceptional service, with real people at the end of the phone any time of day or night, 365 days a year. So we figured it made far more sense to use every single penny we currently pay in credit interest to give customers the chance to earn serious interest on higher interest savings accounts.
We’re also addressing concerns about overdrafts. From November, every first direct customer will get an interest free overdraft up to GBP250. And we’re scrapping the GBP2.5 monthly fee for personal text message alerts, which means that no-one need slip into the red by accident thanks to our ‘red alert’ texts.