The British banking industry has been criticised recently for the lack of current account competition, partially due to low consumer confidence around switching. We correct some common misconceptions with our five-step mythbuster.
Low switching levels
The recent Treasury Select Committee report on retail banking made glum reading for those of us trying to find the best place for our money. In a view echoed by the Independent Commission on Banking’s report on reforming the banking system, it highlighted the need for increased competition between Britain’s banks and easier methods of switching current account.
It noted: ‘Competition can only be effective if consumers feel confident in switching to new providers. Although there is evidence that the system has improved, the perception remains that there are still risks involved in switching, and levels of switching remain low.’
To guide you through the switching process, we’ve put together a simple five step plan to switch current accounts. But why don’t we all switch already?
The five myths
1) One bank’s deal is as good (or bad) as another
The most pervasive banking myth also happens to be the most, well, mythical. The truth is that current account interest rates vary widely, as do charges for going overdrawn. What’s more, some accounts will actually give you money to switch for them, like the £100 currently on offer from First Direct and Santander .
2) They all treat me the same way – badly
Customer service is a big issue for many of us, and banks don’t have the best reputation in this department. That’s why Which? has built customer satisfaction scores into our ratings, with the best being awarded the ‘Recommended Provider’ badge of honour. To feature as a Recommended Provider, a company must get the best scores in our latest customer satisfaction survey and must offer a least one top 10 current account for credit interest, overdrafts or current account mortgages.
3) I can’t switch because I’m currently overdrawn
This is an admittedly large obstacle to switching, but thankfully it’s no longer true. Many providers, such as Santander, now offer to match your overdraft when you switch to them.
4) The bank won’t automatically switch all my direct debits and standing orders.
Not only is this not true, the banks are actually obliged to help you make switching easier. Once you inform your new bank you want to join they will contact your old bank who then have three days to send a list over of all your standing orders and direct debits. All they need from you is a signature and the only paperwork you’re left with is updating your bank details with your employer, pension provider and anyone else who regularly pays into your account.
5) Something will go wrong
Any system can throw up instances where things go wrong. However, a Which? survey found 74% of the people who had switched current account said the process was easy, with 32% finding it very easy. The Office of Fair Trading (OFT) meanwhile found 85% of switchers reported they were satisfied with the switching process.
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