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First Direct axes current account interest
(21-09-07) - First Direct has announced that from 1 November, it would no longer pay interest to current account holders.
The bank said that the move - taking interest on current accounts from two per cent to nothing - was a response to customer feedback.
Chris Pilling, First Direct chief executive, told The Guardian that customer service was the most important factor for its customers. He said: “A staggering 96 per cent of our customers told us that credit interest wasn’t an important factor in choosing to bank with First Direct,” while a further 70 per cent didn’t know the rate of interest on their account.
The bank claims that the move - which will see current account and cheque account customers automatically moved to a new 1st Account - will allow it to offer better valued features to its current account customers as well as a better rate on its savings accounts.
Customers on the 1st Account will get a free £250 overdraft and the opportunity to sign up for “free” text messages that alert them when they near their overdraft limit - a service that now costs £30 a year.
Savings accounts interest will go up from 4.75 per cent on the highest balances to 5.5 per cent on all accounts more than £1 in credit. However, while current account customers are automatically being moved to the 1st Account, customers will have to personally request a move to the higher paying savings account.
First Direct’s policy change comes at a time when other banks are competing on the high street are battling it out with ever more appealing offers and interest payments of up to eight per cent.
Chris Eagle, CreditChoices.co.uk commercial manager, said: “First Direct lost a lot of customers last year after introducing a £10 fee on current accounts depositing less than £1,500 a month and this latest move is unlikely to improve its popularity.
“Any customers looking to move to a more lucrative current account have a host of best buys to choose from, with incentives ranging from eight per cent interest payments, to £100 cashback or £25 for every successful friend referred - there is no longer any reason to stay with a poor paying current account.”
