2.8 Million Bank Switches Create Current Account Storm

By: MoneyFacts

In previous years banking customers have had little incentive to switch their current account, but since the launch of the Current Account Switch Guarantee in 2013, almost three million people have ditched their old account*. As a result, a veritable current account storm has been created as providers compete to attract new customers.

Banks and building societies have been increasingly keen to take a slice of the switching action by offering lucrative rewards and cash incentives to entice new customers. These deals have grown in size over the last three years, and our Moneyfacts.co.uk research shows that some accounts now offer cash rewards of up to £220 in the first year. More current accounts are also offering attractive interest rates for savers – an appealing feature in a time when savings rates are locked in a continuous freefall.

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“It’s fantastic that millions of people have mustered the courage to switch their old current account in favour of something more cost-effective. Customers really can get something for nothing if they choose an account with a cash reward, so it’s unsurprising that they are attracting interest. For example, in the last three months alone Santander has gained over 50,000 switchers with its lucrative 123 Current Account, which offers up to 3% credit interest and cashback.

“However, customers would do well to check their spending habits before they commit to a new account to ensure that it meets all their needs. Over 90% of typical day-to-day current accounts charge fees of some kind, which could outweigh any rewards or interest. For instance, new customers of the 123 Current Account need to check that they can earn enough cashback and interest to warrant paying the £5 monthly usage fee. They should also carefully check the accompanying overdraft fees if they regularly become overdrawn. It’s hoped that there will be a crackdown on excessive fees by the Competition and Markets Authority (CMA), but in the meantime consumers should assess a current account in its entirety.

“That said, customers need to move quickly if they are to make the most of the deals currently on offer - HSBC, Clydesdale Bank and Yorkshire Bank recently withdrew their cash incentives while Halifax and first direct reduced the amount they pay, so consumers need to act fast to take advantage.”

*Source: Bacs Payment Schemes Limited switching figures.

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