More people are likely to get divorced than change their bank account, according to a recent survey. The thought of endless form-filling and making sure that direct debits have been properly transferred means many people are simply put off the idea of switching their bank account to a better deal.
But competition in the market is increasing and it is now easier than ever to make the switch.
Among the most popular current accounts is Alliance & Leicester’s Premier Direct Current Account, which pays an impressive 8.50pc interest. Others include an account from Abbey that pays 8pc and another from Lloyds TSB that offers 6.4pc.
However, customers should be aware of the terms and conditions or they may end up missing out on the generous rates. For example, many of these offers require customers to put a minimum amount into their account each month.
The Alliance & Leicester deal only pays the high interest if your account is credited with a minimum of £500 each month. At the same time, the interest on the account plunges to just 0.10pc if your balance is £2,501 or more.
Check the details on the account and then make the switch if the circumstances are right for you. Research shows that many mainstream current accounts pay just 1pc or less, meaning that you would earn just £1.50 before tax annually on an average balance of £1,500.
But by moving your money to a higher interest account that pays 6pc, you could boost this amount to £90 before tax, based on the same balance. So why are banks working so hard to secure your main current account? Well, it allows them to cross-sell you other financial products, such as insurance and credit cards. It is this type of business which makes banks the most money – much more so that the current account which you initially applied for.
On this basis, it could be argued that it is a bank’s interest to make it deliberately inconvenient for customers to take their business elsewhere. But customers should be prepared to vote with their feet and switch accounts.
If you can make some extra money by receiving a better rate of interest, then it makes sense to switch to a provider that offers you something in return for your valuable custom. Changes to the Banking Code five years ago should help to allay any fears you may have about switching your bank account.
The changes meant that you now have to fill in only one form with your current bank, which should then pass on details of your standing orders and direct debits to your new bank within three working days.
The account should be operational within 10 working days of your new bank approving your application. If something goes wrong with the transfer and you end up paying additional charges, the code also requires your old bank to cover the costs if it is to blame for the error.
By MYRA BUTTERWORTH