NatWest/RBS launch new cashback current account in bid to compete with rivals but monthly fee signals 'free banking' is coming to an end
- Reward current account offers 3% cashback on household bills
- Comes with £3 monthly fee in another sign 'free banking' is ending
- Banks looking to compete with rivals after losing thousands of customers
NatWest and RBS will launch a new reward current account offering customers three per cent cashback on household bills as it aims to stem the flow of people switching away.
And in another signal 'free banking' is coming to an end, customers must pay £3 a month for the new account, which the bank estimates will earn them an average of £90 a year, once the charge is deducted.
Those who have a silver, platinum or black packaged account with Natwest will have to pay a slimmer £2 per month.
New account: Both NatWest and RBS are launching a new current account on October 12 - but is it any good?
The new account comes at a time as NatWest/RBS lose ground to rival banks. In 2014, NatWest lost a net 71,000 current account customers via the official switching process. Only Barclays fared worse. RBS lost a net 39,400 customers.
NatWest/RBS estimate that anyone who pays eligible bills of more than £100 per month will make back more than they pay in fees on the account, which launches on October 12.
Unlike Santander, and its 123 account, the NatWest/RBS offering does not come with in-credit interest.
Santander is raising the fee on its 123 account from £2 to £5 in January. It too offers three per cent cashback on bills, but also three per cent on balances between £3,000 and £20,000.
Andrew Hagger, of information website Moneycomms, said: 'Another current account charging a monthly fee is another step towards the end of free banking.
'It's not surprising to see NatWest/RBS make this effort to retain more customers win new business and feel that it may be in part a reaction to the current account switching figures.
'This NatWest/RBS deal is good news for people who have say £200 or £300 worth of qualifying direct debits as they'll earn a net £3 or £6 per month respectively for doing nothing.
'However with the tariff for agreed overdrafts is expensive - charging a £6 monthly fee and interest at 18.28 per cent - so customers who dip into the red for a couple of days each month or longer may be better off looking elsewhere as the costs could easily wipe out all or most of the rewards benefit.'
The Natwest/RBS reward account will offer customers three per cent cashback on seven types of household bill paid by direct debit: council tax, gas, electricity, water, phones, TV and broadband.
Partners on the deal include the likes of British Gas, Thames Water, O2 and BT.
Once customers have earned £5 in rewards, they can choose whether to cash in, trade for shopping vouchers, or donate to charity via the banks' cashback plus scheme, which will be renamed MyRewards.
They also have the option to 'trade up' their cashback with retailers such as Cineworld, Café Nero and Curry PC World - in many cases exchanging a £5 reward for a £10 voucher.
Customers who get the reward current account and then sign up for the reward credit card will have the annual fee refunded.
Santander success: Sports superstars such as Jessica Ennis-Hill are used in its advertising - and the 123 current account has been a major success in recent years
Meanwhile, Santander offers three per cent cashback on phones, TV and broadband. Gas and electricity bills pay two per cent cashback, while water and council tax will earn one per cent back.
NatWest/RBS are not the only ones trying to snap up some of Santander's current account share.
Tesco Bank recently scrapped its £5 current account fee, which previously applied to anyone depositing less than £750 per month.
This means anyone who holds a Tesco Bank current account will earn three per cent interest on credit balances up to £3,000, without having to pay a monthly fee.
Barclays launched a new programme in April called blue rewards. Customers pay a £3 monthly fee but can earn upwards of £7 per month in return depending on how many Barclays products they hold.
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