To be rewarded for loyalty, get tough

There's been an awful lot of fuss made over the past couple of weeks about how many of the best financial products on the market are only available to new customers – sparked by the launch of Abbey's 8 per cent current account, for which existing and loyal Abbey customers will not qualify.

I have some sympathy for those who feel let down, but such tactics have always been commonplace, not just in the financial services industry, but in every instance where you're signing up to a new long-term contract.

When I opened my bank account with HSBC 11 years ago, they gave me £50 cash and a bunch of student discount vouchers. That was one of the reasons I chose them. But I've not been going back to them every year, complaining about the fact that they're still giving freebies to new student customers – and not rewarding me for my loyalty every 12 months.

Signing up to a new bank, utility provider or even magazine subscription will always get you a better deal than the regulars get – because they know all too well that once you're in the door, you're likely to stay long enough for them to make their money back from you. Furthermore, with your name, address and dozens of other details about you on file, you're ripe for cross-selling opportunities.

While Abbey's 8 per cent current account may sound like a great deal, it'll actually be worth no more than £100 to the average customer – as the rate only applies for the first year and only to balances of up to £2,500. Also, most people have a diminishing amount of money in their current account each month, so will rarely be earning the 8 per cent on the full £2,500 limit.

If you look at it like this, the "generous" 8 per cent offer boils down to a benefit of about £9 a month – £6 of which you could have earned anyway, by having your money in a current account with the likes of Alliance & Leicester.

Halifax's offer of £100 cold hard cash, for customers who switch their current account to them, is actually much more appealing – as at least you can get your hands on it all in one go. You'll hardly notice £9 a month.

The reason the incentives for switching current accounts are often so generous is because a) the banks know that people think it's going to be a hassle, and b) once they've got you in the door, you're worth a lot of money to them.

But if your bank, utility provider or DVD mailing service is not providing you with a competitive price and service, don't think that your only option is to switch away. The threat of moving is often just as powerful as actually taking action.

If the banks are willing to spend £100 acquiring every customer, you can be sure that most of them will be willing to spend as much keeping the odd dissatisfied long-term client. For those with the patience to write letters of complaint, or those with a pushy phone manner, it's not always that difficult to squeeze a few pounds out of your bank to retain your loyalty.

The same works even better when you're renegotiating your mobile phone contract – where the sales forces are usually armed with a degree of flexibility to strike a deal with you.

The moment you say that you're going to take your business elsewhere, you'll be surprised how fast they start offering you a more expensive phone, or a cheaper package.

Being pushy may not be very British, but it'll get you much further than sitting around moaning to yourself.