Egg has introduced a new-style spending account, Egg Money, which the bank claims is a revolutionary way for customers to manage their money and get more from their spending. The product is based on the 'pot' principle - customers leave the amount of money they require to pay regular monthly bills in their current account and transfer the remaining to a spending account.
The spending account offers benefits such as a debit card, cash withdrawals at ATMs, and cash back on purchases, with extra cash back or discounts from certain retailers. Moreover, Egg Money offers a credit facility with a typical rate of 6.9% APR variable and, similar to offers available on credit cards, customers will have up to 50 days' interest free on all purchases when they pay off their outstanding balance each month.
One of Egg Money's main selling points is that the account will assist customers in managing and budgeting their money. By knowing how much money they have left to spend, customers will be able to stay within their overdraft limit and thus avoid overdraft charges. This is a definite plus given that the majority of customers have no idea what their current account balance is at any given time.
The current accounts market has recently come alive with many key players stepping up their strategies. For instance, HBOS has introduced the first money back on a debit card and Lloyds TSB has been offering GBP50 to each new current account customer. Although the UK current accounts market is a mature one and switching is relatively low, any additional customers acquired are important because of the possibility of cross-selling of other products.
Egg is not competing directly with current accounts as the lender does not offer standing order services and hence, customers are not required to switch their current account. However, anyone who is opening an Egg Money account will be moving any extra money from their existing current account from another provider and may be using the credit facility attached with the spending account.
The potential threat this offers means that it will come as no surprise if similar propositions are adopted among current accounts providers.
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