HSBC launches 'revolutionary' account

HSBC today claimed that it is 'modernising the entire banking sector' - with the launch of a new packaged account and the introduction of a price promise on retail purchases for its current account holders.

However, its 200,000 poorest customers with basic bank accounts and children with Live Cash won't benefit from the price promise deal.

And while HSBC is offering top-of-the-range fraud protection for packaged account customers, it's not extending the same service to those with its standard account.

The only new account in HSBC's portfolio is the Bank Account Plus. This is a packaged account that in return for £9.95 a month - rising to £12.95 from January 2006 - gives you worldwide family travel insurance; commission-free foreign currency; free overseas cash machine withdrawals and 50% discount on certain UK hotel bookings.

You also get access to a website and helpline if you are a victim of identity fraud. However, if you went it alone rather than opting for this account, then you could pick up worldwide family cover with insurer Direct Travel for £72 a year. Marks & Spencer offers commission-free currency to anyone.

And while not having to pay a minimum of £1.50 each time you take money out of a foreign cash machine is a saving, HSBC still has exchangerate loading which means it takes away about 2.75% of each transaction as commission.

And if you go overdrawn, you'll be charged 12.8% interest. Credit balances in the Plus account earn just 0.08% net (0.1% gross) on up to £2,000 rising to 1.6% (2% gross) if you keep £50,000 in the account.

In contrast, Cahoot's no chequebook account pays a flat rate of 3.41% net (4.27% gross). However, the overdraft rate is higher at 21.9%.

Alliance & Leicester's Premier Plus pays 3.91% net (4.89% gross) and has an overdraft rate of 7.9%. It also comes with free individual travel insurance.

HSBC has also made some changes to its Premier account, which currently has 300,000 customers. This account is open only to those earning at least £75,000 who, unless they also have a substantial mortgage or savings with HSBC, pay £19.95 a month.

They now also get the free travel insurance, transaction charge-free overseas cash machine withdrawals and fraud website/ helpline that Plus account holders get.

They get an overdraft rate of 9.9% and earn credit interest of 0.08% (0.1% gross) net up to 1.8% (2.25%) on £100,000.

The only change that HSBC's 7.6m customers with its standard bank account get from this radical 'modernisation' is access to its Price Promise - which both Premier and Plus account holders also get.

Under this, if you buy something from the high street and then find them sold cheaper elsewhere, HSBC refunds the difference.

It works like this. You have to have bought branded goods with your HSBC debit or credit card. Only goods from certain sectors are included - motorised goods, for example, aren't included. Online purchases aren't covered - and if you find your item cheaper elsewhere, then it mustn't be in a sale.

You need proof (a catalogue or leaflet). The minimum difference in price you can claim for is £10 and the maximum is £1,000 per item. And each customer has a limit of £5,000 a year.

However, HSBC's 200,000 customers with basic bank accounts and its young customers with Live Cash accounts don't get this protection.

HSBC said it had excluded these customers 'for fraud reasons' and also 'because we don't want to be seen to be encouraging those who may not be able to afford it to spend.'

Savers feel pinch

SAVERS with HSBC have suffered harsh rate cuts of as much as 0.25% before tax as the bank continues to favour borrowers.

The cuts, effective from last week, come even though the Bank of England has held base rate steady at 4.75% since August last year.

Those in the bank's Instant Access Savings account now earn just 1.32% (1.65% before tax) on balances of £10,000, which works out at £132 of interest after 20% savings tax in a year. The rate on £50,000 is just 1.92% (2.4%), worth interest of £960 after 20% tax or £720 after higher rate tax.

Those in its Higher Interest Savings Account have also seen cuts of up to 0.25%, but they no longer have to give 60 days' notice to remove their money. Rates start at just 2.28% (2.85%), well below the 2.9% inflation rate.

Cash mini-Isa holders also see a rate cut of 0.13 to 0.16% on sums over £3,000. The top rate is now at 5%, against a former 5.25% on balances of £15,000 or more.

Meanwhile, the bank is favouring those who hold their current accounts. It has introduced a competitive Preferential Cash Isa for its Premier and Plus current account holders, paying monthly interest of 5.13% tax-free, making an annual equivalent rate of 5.25% on £15,000 plus, or 4.75% on savings up to this level.

It is raising the rates on its taxable Premier Savings account, open to Premier current account holders, by around 0.15% before tax. But even then it only pays 2.6% after 20% savings tax (3.25% before tax) on balances up to £50,000, 2.96%, (3.7%) at £50,000 and 3.2% (4%) at £100,000.

In February, the bank launched an attractive Regular Saver account for its current account holders, paying 6.4% (8%) fixed for a year for those putting in a minimum £25 a month for 12 months. The maximum is £250 a month.