Lloyds TSB to spark accounts war

BANKING group Lloyds TSB is set to spark a current account war on the High Street by boosting its interest rate and luring customers with cash incentives.

The Big Four bank has increased the rate on its Classic Plus account to 4% from 3.75% and is offering a £50 golden hello to new customers. Existing customers will also be given £50 for every new customer they introduce.

Competition for customers on the High Street is fiercer than ever, especially following recent reports that the supermarkets' banks are attracting customers away from the more traditional institutions.

The large High Street banks have also seen their current account business come under attack from smaller operators such as Alliance & Leicester and Halifax but have been slow to react.

Lloyds' aggressive marketing drive is not only aimed at those rivals but also at its big High Street competitors. Director of current accounts Gordon Rankin said: 'Many banks are guilty of sitting back and not giving customers what they want. I simply cannot believe that some of our competitors have failed to move with the times.'

The company claims the number of people switching accounts to Lloyds has doubled over the past year, but would not confirm numbers.

Andrew Hagger, personal finance researcher at Moneyfacts, claimed the move will provoke the banks main rivals, HSBC, Natwest and Barclays, into action.

He said: 'They will have to come up with something to interest their customers, but it is unlikely to be cash incentives, it should be a little more creative. Any increase in competition is good news for consumers.'

Nick White, head of personal finance at uSwitch.com, said: 'With the likes of Tesco and Sainsbury's branching out into the financial services industry, questions arise as to whether supermarkets can give the more traditional banks a run for their money.'

Lloyds' offer is still way below the current market leader, the Alliance & Leicester, which offers 5% AER and a £20 incentive to open an account online. Halifax is also planning to introduce a cash back debit card later this year through its current account, which pays 3%. Lloyds' offer does dwarf the current accounts of its main High Street rivals, however, which all pay 0.1% on their current accounts.