- First Direct move highlights poor rates on current accounts, MoneyExpert.com says
Nearly two out of five current accounts on the market pay just 0.1 per cent to customers in the black, new research* from MoneyExpert.com shows. And another nine per cent pay one per cent or less, analysis from the independent personal finance comparison service shows.
The average interest rate for customers in credit across the 91 current accounts on the market is 2.06 per cent with firms such as Abbey, Alliance & Leicester and Coventry Building Society paying six per cent or more.
First Direct has broken ranks by being the first bank to make a virtue of paying no interest on its current account from November 1 instead offering customers access to a 5.5 per cent instant access account or an 8 per cent regular savers account.
And MoneyExpert.com’s research shows accounts paying effectively nothing to current account customers in the black are already the norm with 35 accounts paying 0.1 per cent.
It is urging customers to act and switch to accounts which meet their needs on overdraft facilities, credit interest or other service options.
Sean Gardner, Chief Executive of MoneyExpert.com, said: "First Direct’s decision to scrap interest on its current account might look like a bold move but millions of us currently earn next to nothing in interest so it’s not quite as revolutionary as it might seem.
"The choices in the current account market are becoming clearer with banks being forced to stake out definite positions and compete for business.
"On one side there are banks making a big deal of paying interest on current accounts while others are cutting overdraft rates and charges for going into the red.
"All the moves are to be welcomed up to a point but the responsibility is now being switched to customers who have to decide what they want from an account and then switch accordingly."
MoneyExpert.com’s switching index, which monitors consumers’ switching of a range of products every three months, shows more than 3.6 million people have moved current account provider in the past year – around 300,000 a month.
The Banking Code states that current account providers have to provide details of standing orders and direct debits within three working days of a request from a new bank. The new bank has to provide details of the new account within 10 working days after approving an application. Five years ago the process could take as long as 12 weeks, MoneyExpert.com says.
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* MoneyExpert.com analysis on October 9th 2006 and August 9th 2007