Have you switched banks yet? You should definitely consider it. There has never been a better time – challenger banks are coming on to the scene and the established players are falling over themselves to offer bigger and juicier incentives to get you to switch to them.
Half of UK consumers have stuck with the same bank for more than 10 years, according to a report published in April by the Competition and Markets Authority.
Maybe you’re one of them and you’re just not sure it’s worth the hassle? Let me convince you otherwise. Here are five reasons you need to flip the switch.
1 Switching is much easier than it used to be
A quick straw poll I conducted on Twitter (very unscientific, but still) revealed people are finding switching very easy – one person I spoke to told me she changes banks every six months to grab the latest incentive and has had no problems so far. When I switched a few years ago, the bank failed to transfer my direct debits across in time and it ended up being a bit of a pain. But, since 2013, a standardised switching process has been established between most major banks. It’s called the Current Account Switch Service, and it guarantees the process will be completed in seven working days. Once you’ve decided the bank you want to switch to, you just fill in a form and they take care of the rest. This includes redirecting any payments accidentally sent to your old account for the next three years. And if they mess up your direct debits or standing orders, they have to refund any charges you incur and any lost interest. BACS, the organisation in charge of the service, says more than 2 million people have switched since it came online in September 2013. For an in-depth walkthrough, see Which’s step-by-step guide here. So, other than a faster process, what’s enticing customers to jump ship?
2 Big cash bonuses
Lots of banks are offering cold, hard cash to encourage us to switch. They’re not measly sums either, we’re talking £100-£150 for transferring to some big name banks, although they usually require you to close your old account and use the switching service to claim the incentive. There are often other conditions attached such as how much you need to pay in each month, and how many active direct debits you need. Here are some of the best cash incentives available at the moment:
3 Earn more interest from your current account
If you’re usually in credit and you’ve already maxed the interest you can get from your savings, you should consider an account offering a decent interest rate. A 3% interest rate might not sound great, but with UK interest rates so low for so long, it’s not bad, relatively speaking.
If you have a decent balance in your current account and you adhere to the terms and conditions, you can earn the same sort of figures you’d expect from a one-off switching bonus, but every year.
Santander’s 123 account and Lloyds’ Club Current Account are also popular options which pay good interest if you have a large balance in the account, but they do charge a fee so might not be suitable for everyone. Santander will charge £5 per month from January 2016, while Lloyds requires you to maintain a balance of £1,500 each month to avoid a monthly £5 fee.
4 Your bank can reflect your values
If a cash bribe or a better interest rate doesn’t matter much to you, perhaps you should think about a more ethical alternative to the high street banks. Banks naturally use money from their retail arms to invest in the stock market. They want the best return, no matter what the societal cost. Tobacco, fossil fuels and fast food chains are all fair game. If this isn’t where you want your cash invested, why not try a provider like Triodos? It has ethical investment policies that give you peace of mind that your money isn’t helping to fund morally questionable industries.
Alternatively, many credit unions now offer current accounts and they are a very ethical choice as they support the financially excluded in their communities, help people get out of the high interest debt trap, and encourage a culture of saving not borrowing. Not a giant vampire squid in sight.
5 Better service, fewer nasty charges
When things go wrong, you need your bank to be on your side. You don’t have to put up with poor customer service or punitive overdraft charges. First Direct, which frequently comes top in customer satisfaction surveys, not only offers £100 to switch to it, but it also gives you another £100 if you don’t like it and want to leave.
Some new entrants to the market such as Metro Bank are focusing heavily on customer service and old fashioned face to face, in-branch service.
Banks are also competing to offer the best overdraft facilities, meaning there are good interest-free deals and monthly caps out there to take the pain out of unplanned borrowing. And don’t think you need to pay off your overdraft before you switch banks either – you can often take it with you.
These are five great reasons to switch, but most of us still aren’t doing so. Perhaps it’s down to this long-lasting perception that it’s too much hassle, or even misplaced loyalty to a familiar brand.
But let’s hope the tide is turning. Switching encourages competition and promotes financial literacy, which makes life better for all of us.