first direct reshapes the current account

first direct is to reshape its current account and savings products on 1 November to help customers earn serious money on their savings rather than small change on their current account.

Following extensive customer research, the bank is to stop paying interest on its current accounts and instead reinvest every penny in what the research showed customers actually wanted: a better deal on savings and overdrafts. The bank will also offer all customers free ‘red alerts’ by text message to help them avoid going overdrawn or over their overdraft limit.

first direct currently has two current accounts, Cheque account and Bank account, which pay 0.10% and 2.00% AER respectively. Its customers are split evenly between the two accounts. From 1 November, first direct will merge these accounts into the 1st Account. The new account will not pay credit interest but in return the bank will give:

A better deal for savers

A new no-strings instant access savings account, called Everyday e-Saver, paying 5.5% AER;
Customers can set up an automatic monthly sweep to move money from their 1st Account to their Everyday e-Saver, to maximise the amount they earn from their savings;
A new Regular Savings account paying 8.00% AER fixed for a year. Customers can save between £25 and £300 a month, which is £50 a month and £600 a year more than most other providers allow.

A better deal on overdrafts

The first £250 of overdraft will be interest-free;
Free text message banking (which currently costs £30 a year) for all first direct customers. Customers will enjoy personal text alerts to warn them when they’re close to going overdrawn or over their overdraft limit. Free text alerts can also be set up for a host of other events – for example, when the balance reaches a certain amount.

first direct estimates that an average customer who does absolutely nothing will be better off by £1.20 a year, and the average customer who moves their savings from first direct’s existing instant access accounts to the new online Everyday e-Saver account will be better off by a further £34.80 a year. (See notes to editors for further details of the savings calculations.)

Chris Pilling, first direct’s chief executive, explained: “A staggering 96 percent of our customers told us that credit interest wasn’t an important factor in choosing to bank with first direct. And almost 70 percent 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 £250. And we’re scrapping the £2.50 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.”

New £100 service guarantee for new customers

first direct is introducing a new incentive to customers joining the bank. Any new customer opening a 1st Account from 1 November who is not wholly satisfied after six months can claim £100. first direct’s easyswitch team will help them move to another provider. The service guarantee replaces the bank’s previous joining incentives. (See notes to editors for details of the guarantee.)

Chris Pilling added, “first direct isn’t like other banks. We’re famous for our amazing service and our ‘unbank’ way of doing things. So we’re launching the first service guarantee from a British bank. While most banks have a team of people to help people join, only first direct would think of using its switching team to help customers leave if they’re not completely satisfied.”

first direct’s customer website is at firstdirect.com.