First Direct cuts interest payment on current accounts
The Internet banking arm of HSBC, First Direct, has announced that it will no longer be paying any interest at all on its current accounts, and has merged its two current accounts into one account, which is now known as the 1st Account. First Direct came under fire earlier this year after announcing that it would be charging a £10 monthly fee to some of its customers – a decision that resulted in the bank seeing a mass exodus of customers. This latest announcement could see more of its loyal customers uprooting and moving to another bank.
First Direct officials have defended the decision by stating that although interest payments will be cut on current accounts, the money will be used to provide increased interest payments on savings accounts, which means that the customers will still benefit. The interest payments on current accounts was between 0.1% and 2% on credit balances depending on which of the two accounts the customer held. First Direct states that this money will now be ploughed into interest rates paid on savings, taking the interest rate on the instant access account to 5.5%.
However, some experts state that even with additional interest being paid on the instant access account there are still other savings accounts out there that offer a significantly higher rate of interest, with some accounts now offering 7% or more to savers. With the new 1st Account customers will receive a free £250 overdraft facility along with free text banking that could help some customers to avoid exceeding their limit thus avoiding the charges applied by the bank.
One First Direct official stated: "A staggering 96 per cent of our customers told us credit interest wasn’t an important factor in choosing to bank with us. We figured it made far more sense to use every single penny we now pay in credit interest to give customers the chance to earn serious interest on higher-interest savings accounts."
External Links: