Competition for new customers has led to a host of banks launching cash bonuses, as long as they meet the individual bank’s eligibility requirements.

Many banks also offer cashback, in-credit interest or preferable savings rates to those holding a current account.

With the country in the middle of a cost-of-living crisis, the cash bonuses on offer will be welcomed.

Inflation was 9.9% for August, a slight dip from July’s rate of 10.1%, and interest rates are currently at 1.75%, though they are expected to rise further this week, pushing up the cost of borrowing.

Therefore any way to cut costs, or boost bank balances, are likely to be popular.

Rachel Springall, finance expert at Moneyfacts, said: “Switching current accounts is easy to do using the Current Account Switch Service (CASS) and some banks will pay an upfront free cash incentive to entice customers.

“However, it’s the overall package of an account that should be weighed up before someone commits to switching their current account. Some of the most lucrative bank accounts come with eligibility criteria, so it’s vital consumers take time to compare not just the benefits, but also what criteria they must satisfy to get the perks.”

How to get free money

Most banks require you to switch via the CASS in order to receive the bonus. It is a scheme which automatically switches your current account and any direct debits and standing orders you have set up.

There may be other requirements too, such as a minimum amount to be deposited each month (often around £1,000) or a minimum number of direct debits to be set up.

You usually need to be a new customer too, which means you can’t have had an account with the bank you’re switching to for a certain period – or any of its sister banks. With First Direct, for example, you’re not seen as a new customer if you already have an account with HSBC, its parent company.

There are time limits for some offers, such as those for RBS and NatWest. If you want to switch to either of these accounts, you need to do so within the next few weeks in order to receive the bonus.

The banks offering cash freebies

Several banks are currently offering cash freebies for eligible customers:

First Direct

New customers switching to the First Direct 1st Account will get £175. You’ll need to open an account and switch your existing current account within three months and deposit at least £1,000. The money will then be paid within 28 days. You can’t switch from a First Direct or HSBC account.

If you just open an account without switching your current account, you’ll get £20 as long as you use it in the first three months. It also has a regular savings account paying 3.5% AER on up to £300 a month for a fixed 12-month term.

NatWest

New and existing customers get £175 for switching their current account to the NatWest Reward, NatWest Select, RBS Reward, RBS Select, or Ulster Select accounts. You need to open the account and switch (online or via the mobile app) by 5pm on 3 November with NatWest or 5pm on 20 October with RBS and Ulster banks to get the bonus.

You also need to pay in at least £1,250 and use mobile banking by 16 December for NatWest and 2 December for the other two banks.

If you’ve received a bonus for switching before you won’t be able to get the money this time. You also can’t switch to a bank with which you already have an account.

You’ll receive the £175 by 12 January 2023 (NatWest) or 29 January (RBS and Ulster). Reward accounts also pay cashback of up to £36 a year, if you meet its requirements, in return for a monthly fee.

Santander

New and existing customers switching to the Santander 123 Lite account, 123 account, Private current account or the Everyday current account will get £175. Customers need to deposit at least £1,000 and set up two direct debits to get the bonus. Anyone who has benefitted from a previous Santander switch offer is not eligible.

The Santander 123 accounts also pay up to 3% cashback on some household bills for eligible customers. The amount of cashback depends on the type of bill and it is capped each month. Cashback has also been doubled for two months from September for energy bills. There are fees for these accounts and requirements for getting cashback, such as depositing £500 a month with the 123 accounts.

Nationwide

New customers who switch their current account to the Nationwide FlexDirect, Flex Plus or Flex Account will get £100. Members of Nationwide (someone with a mortgage, current account, savings account or business savings account) will get £125.

If you’ve already had a switching bonus you won’t qualify. You’ll also need to set up at least two direct debits to qualify. In addition, the FlexDirect account pays in-credit interest of 5% on up to £1,500. There is a £13 fee for the Flex Plus account.

Is a switching bonus worth it?

While some banks are offering a one-off cash bonus, others are giving in-balance interest, access to regular saving accounts or cashback to customers.

The best option will depend on your personal finances and circumstances and it’s worth taking a look at the small print before switching.

There may also be monthly fees to consider, so these need to be subtracted from any bonuses paid out. If you have an overdraft, check the interest rate on this. As interest rates are rising, if you are borrowing money using an overdraft, it could be an expensive way to do this.

“Consumers who are searching for a rewarding bank account may wish to choose one that offers cashback on spending or even on their monthly bills, there are even accounts that pay a monthly reward when certain eligibility criteria is met,” Springall said.

She added: “On the other hand, those consumers who may dip into their overdraft could be better off choosing an account with a competitive overdraft tariff or even an account with an interest-free buffer.

“Those who plan to make frequent trips abroad can also find accounts that don’t charge them for using their debit card in an ATM or in a store, so they can avoid paying out on transaction fees compared to a more traditional bank account.”