Barclays U-turn on account fees: Bank will pay customers £4 a month as competition hots up
Barclays will offer to pay current account customers from next week, intensifying the battle sweeping the high street since the seven-day switching service made it easier to move banks 18 months ago.
The bank has been losing customers to rivals through the seven-day service, as other lenders have won clients by offering financial rewards.
Barclays’ chief exec Antony Jenkins had previously argued that the banking system would be healthier if customers paid for their accounts. He even backed the idea that free in-credit accounts should be banned by regulators.
“I do think that would be a step forward, yes,” Jenkins said just last month, when asked if free bank accounts should be outlawed.
“It’s difficult to achieve of course because the banks can’t do that [by themselves],” he told ITV.
“It would probably have to be regulated or legislated.”
Chairman Sir David Walker has also hit out at free bank accounts in the past, referring to them as “unfair”.
Instead of offering cash to entice customers, Barclays has previously sought to make a name for itself with cutting-edge technology such as mobile cheque imaging. Yet it has now changed tack.
The idea of charging for accounts has been gathering pace with MPs and regulators at the Competition and Markets Authority looking into such a change.
But in a dramatic change of direction, high street giant Barclays is now paying customers to come to them.
Around 100,000 customers switch accounts every month with the seven-day service, and Santander has been the big winner so far.
It charges £2 per month, but most customers earn more than that from cashback on bills, plus three per cent interest on balances between £3,000 and £20,000 – more than is paid on many savings accounts. Santander won 59,922 more customers than they lost in the second quarter of 2014, the last period for which bank-by-bank data are available.
Halifax has also performed well, offering new customers a joining bonus of £100, plus £5 per month. It won a net 15,125 customers in the same three-month period.
And Nationwide won a net 14,860 through the service in the quarter, as customers flocked to its account which pays five per cent interest for the first year.
By contrast, Barclays lost a net 22,119 customers through the switching service in the same period.
But it is now fighting back.
The account feature costs £3 per month, but immediately gives customers £7 per month.
They gain extra payments if they hold mortgages and insurance policies with Barclays, up to £15 per mont, and the scheme could be rolled out to other products in future.
As with many other accounts, the payout is only available to those who use the account regularly – in this case, customers need to pay in £800 per month and set up two monthly direct debits.