Starling Bank, Monzo, Nationwide and NatWest gained the most new current account customers between 1 April and 30 June 2020, according to new data from Pay.UK.
These providers enticed people to make the move despite the extra difficulties of opening an account during the coronavirus lockdown and perks being scaled back to cope with the crisis.
At the other end of the spectrum, Santander, Halifax, Barclays and TSB suffered the biggest loss of bank account customers during this period.
Here, Which? looks at why people have been switching and explains how to move to a new bank or building society if you’re tempted to follow suit.
Which banks and building societies are we switching to?
The latest data from Pay.UK shows how many people moved to and from the main current account providers between 1 April and 30 June 2020.
Below we’ve set out how the banks and building societies fared.
Starling Bank – a Which? Recommended Provider – was the biggest winner, with a net gain of 11,998 new customers in just three months.
The bank managed to entice customers despite lowering interest rates; Starling previously paid 0.5% AER on balances up to £2,000 on a maximum balance of £85,000. However, as of 18 May you can only earn 0.05% on up to £85,000.
The challenger bank offers a cheap overdraft as well as fee-free purchases and foreign ATM withdrawals anywhere in the world. It also has a range of app features such as instant notifications to help you spot fraud immediately.
Monzo and Nationwide also saw big net gains, at 11,393 and 10,083 respectively.
Monzo just missed out on the top spot, but may see higher net gains next time data is published. It recently announced the launch of Monzo Premium, a new packaged bank account that comes with a host of additional services, although it costs £15 a month and you have to sign up for a minimum of six months.
In July, it reintroduced its Monzo Plus card, at a price of £5 which includes new features like discounts on spending and granular budgeting information.
Nationwide is usually a top contender; it was the biggest winner this time last year, achieving a net gain of almost 26,500. Its FlexDirect account was a popular choice with its 5% AER interest offer on balances of up to £2,500 for 12 months. However, due to coronavirus, it slashed rates to 2% in year one on balances over £1,500 in May. Many may have rushed to switch to take advantage of the higher rate before it disappeared.
- Find out more: best and worst bank accounts
How has coronavirus impacted switching?
Switching dipped significantly between 1 April and 30 June owing to the COVID-19 pandemic and a reduction in perks.
Less than 30,000 switches took place in May and June and just over 41,000 in April, according to Bacs. This compares to 113,037 in March.
Generally, banks have been focusing on their current customers to help them through the crisis. For instance, First Direct closed its doors to new customers in March until last month, meaning its current account switching offer of £100 for its 1st Account was also taken away and is not currently being offered.
Almost all of Britain’s high street banks had pulled switching bonuses, with three-figure switching offers from the likes of HSBC and NatWest disappearing.
However, last month, HSBC announced it will offer new customers £125 for switching to its Advance or Premier accounts – one of the most generous switching incentive currently around. Although, it used to offer £175 for these accounts, and £75 for the HSBC Bank Account.
Other banks currently offering switching incentives include:
- NatWest which is offering £125 if you open a NatWest Reward Account;
- RBS which is offering £100 if you open the RBS Reward Account;
- Lloyds Bank which is offering £100 for switching to the Club Lloyds account.
Find out more: best high-interest bank accounts
Are switching figures still falling?
While the coronavirus crisis is not over yet, switching is now on the rise.
Bacs data shows 136,575 switches took place between the start of July and the end of September – 38,383 more than the period 1 April to 30 June.
With cash incentives being reintroduced, this figure may increase further in the last quarter of the year (1 October to 31 December).
Some people may be incentivised to switch to grab higher interest rates – the highest at the moment are Virgin Money’s 2.02% on £1,000 and Nationwide’s 2% on £1,500.
For example, Santander slashed interest on its popular 123 Current Account to 0.6% in August from 1% in May, and 1.5% at the start of the year.
Others may find their bank introduce new charges.
The Bank of England (BoE) is currently considering moving to a negative base rate which could mean banks start charging customers for accounts rather than paying interest.
HSBC this week announced it could start charging for ‘basic banking services’ because of the low rate environment. It says it’s considering charging for products like current accounts, which are currently free to UK customers.
- Find out more: how to open a bank account online
How to choose a current account
Your current account service is not something you’re likely to think about that often, provided everything is working how it should. However, there are some great benefits to switching your current account including receiving cash bonuses or unlocking perks such as a market-leading savings rate.
But there’s no ‘one size fits all’ solution when it comes to choosing a current account; the best deal should match your individual circumstances. For example, factors such as customer service and interest rates could play a part in your decision.
Each year, we survey thousands of current account customers and undertake detailed product analysis to find the best and worst banks. Depending on what kind of account you’re after, our other guides can also help pinpoint a deal to match your circumstances:
- Best high-interest bank accounts
- Best accounts for cashback
- Best bank accounts for arranged overdrafts
- Best bank accounts for unarranged overdrafts
- Best packaged bank accounts
- Best basic bank accounts
Once you’ve decided which bank you want to switch to, you can apply to open it online, over the phone or in a branch.
If the provider is part of the current account switch service (CASS), you’ll be able to open the account in seven working days.
- Find out more: how to switch your bank account