Since I found out about current account switching, I've clocked up over £500.00 in cash! In this post, I write about the benefits of reward bank accounts and how I've 'earned' a few hundred pounds from the banks.
Choosing a reward account for your everyday banking means you are offered perks in the form of: cash back on spending, interest payments on your monthly bank balance, insurance (travel, car, home or mobile), free cinema tickets, free magazine memberships and other perks.
The Extra Good
In addition to the ongoing benefits of a reward bank account, there are times when banks will offer a switching bonus. This is where the bank will offer you straight cash for closing your current bank account and moving to a new provider.
In the UK, this is done through the switching service. How does this work? When you apply for a new bank account, you will be asked if you want to switch your current bank account using the 'switching' service. You say yes and provide you current bank details. Pick a date and tell the bank when you want the 'switching' to happen, within 7 days of the date you pick, all your payments, in and out, direct debits and standing orders will be moved on your behalf. So basically you do nothing.
If your willing to play the switching game, you could make a couple of £100.00 a year. In fact I opened a bank account specifically for this purpose. September 2017 I switched my HSBC account to First Direct, I got paid a £125.00 switching bonus. A month later, I switched my First Direct account to Clydesdale bank, I got paid a £250.00 switching bonus. April 2018, I switched my Natwest current account to the Reward Natwest account, result? Another £125.00. I made an extra £500.00 for a total of 15mins work (if you apply online). And finally in December 2018, I shared a £200.00 payment from Nationwide's refer a friend scheme.
Applications for reward bank accounts will include a credit check or hard pull on your credit report. In most cases a hard pull on your credit report will take points off your credit score. Therefore I would avoid applying for a reward account if you’re close to applying for a mortgage for example.
To get the perks which come with a reward account, you need to meet the monthly requirements set out by the provider. Common requirements include setting up direct debits, monthly account paying-ins usually ranging from £500.00 - £1,500. And sometimes a monthly fee. The fee is usually waived if you meet the monthly pay-in. My source for current switching promotions is the MoneySavingExpert website.
Most airlines and hotel chains offer their own loyalty rewards schemes, they are free to join and may come with sign up bonuses. Airlines partner with other airlines, retail and online stores (Tesco, Argos, John Lewis), hotels (IHG, SPG, Hilton) and credit card companies (American Express, Barclycard, Creation). You can collect air miles or hotels points by booking flights and accommodation directly with the airline or hotel , spending at partnered: airlines, retailers, online stores and spending on reward credit cards.
The fastest way to collect points is through credit card sign up bonuses. If you are able to meet the minimum spending requirements, American Express offers credit cards with sign up bonuses ranging from 5000 to 30 000 points. I personally collect airline points through credit card sign-up bonuses, using the credit card to pay for work travel (train tickets), groceries, entertainment, utility bills and even extra payments towards my student loan.
Redeeming Points for Flight Tickets
How many points would you need for a flight ticket? It depends on the airline and which scheme you are signed up with. If you look at the screenshot below, showing my Virgin Atlantic Flying Club account, I could book a one way ticket from London Heathrow to Johannesburg South Africa at a cost of 12 500 points and a cash payment of £184,91. Take a look at the second screen shot, the cheapest cash value ticket would cost me £1087.41
SCREENSHOT 1: BOOKING WITH AIRLINE MILES
SCREENSHOT 2: BOOKING WITH CASH