So how exactly will this affect you?
What is the Current Account Switch Service?
The Current Account Switch Service aims to make the process of switching current accounts much simpler and hassle-free. At the moment, the switching process can take between 18 and 30 working days, but as of September 16, this will be reduced to seven working days from when the account is opened.
What is the Current Account Switch Guarantee and Trustmark?
The new Guarantee and Trustmark, which underpin the service, are designed to give consumers trust and confidence when switching current accounts. All banks and building societies from this September will need to offer the following guarantee:
- The service is free to use and you can choose and agree your switch date with your new bank.
- Your new bank will take care of moving all your outgoing payments (for example, your direct debits and standing orders) as well as those coming in (for example, your salary).
- If you have money in your old account, your new bank will transfer it to your new account on your switch date.
- For 13 months, your new bank will arrange for payments accidentally made to your old account to be automatically redirected to your new account. It will also contact the sender to give them your new account details.
- If there are any issues in making the switch, your new bank will contact you before your switch date.
- If anything goes wrong with the switch your new bank will refund any interest (paid or lost) and charges made on either your old or new current accounts as a result of this failure.
Although many of us regularly switch our insurance provider or our savings account, we're not so good at switching current accounts. Often this is because we believe the switching process is too complicated or something will go wrong and we'll end up losing money.
But it's hoped that the Current Account Switch Service will encourage more of us to get switching. Not only will the process become far quicker, but customers will also have the reassurance that if anything does go wrong during the switch, they won't be left out of pocket.
Kevin Mountford, head of banking at MoneySuperMarket, said: "The Guarantee and Trustmark will help instil confidence in consumers that they can switch current accounts safely, securely, with the minimum of hassle, and provides reassurance and redress should things go wrong.
"Although in reality, switching is usually relatively straightforward, this move could be a real turning point in improving switching rates in the current account market."
But why bother going through the process of switching current accounts in the first place? Simply because there are a number of highly competitive current accounts on the market right now which could offer you far more than your existing account does. Some, for example, reward you for staying in the black, some won't penalise you for dipping into the red, and others are just renowned for providing top-notch customer service.
We've highlighted some of the best current accounts below:
If you religiously stay in the black, the Nationwide FlexDirect Current Account pays an annual equivalent rate (AER) of 5.00% fixed for 12 months on balances up to £2,500. Bear in mind you must pay at least £1,000 into the account each month and after 12 months, the rate falls to 1.00%.
However, even if you dip into the red, this account could still suit you as it offers a 12-month fee-free overdraft.
Alternatively, the Santander 123 current account pays an AER of 1.00% on balances from £1,000, 2.00% on balances from £2,000 and 3.0% on balances between £3,000 and £20,000. In addition, you will earn cashback on some of your direct debits which leave the account. You will earn 1.00% cashback on your water bills, council tax bills and Santander mortgage payments, 2.00% on gas and electricity bills and 3.00% cashback on mobile phone, home phone, broadband and paid-for TV packages.
However, be aware there is a £2 monthly fee on the account and you must pay £500 or more into the account each month.
Another option is the Halifax Reward Current Account which rewards you with £5 every month you pay in £750 or more and pay out two or more direct debits. What's more, you'll receive £100 when you switch. In addition, you'll be able to take advantage of the new Cashback Extras scheme which is being launched by Halifax in mid to late September. This scheme will allow you to earn cashback of between 5% and 15% at certain retailers, whenever you use your Halifax debit or credit card at those particular stores.
If you're a keen M&S shopper, you might prefer the M&S Premium Current Account which offers a £100 M&S gift card and 20% off your M&S shopping for a year. You will also earn M&S loyalty points with your debit card in M&S, a birthday gift worth £10 and vouchers to spend in store. But be aware the account costs £15 a month.
Finally, if poor customer service is your biggest bugbear, take a look at the First Direct 1st Account. The bank is renowned for its excellent customer service and you will receive £125 for switching to the account and a further £100 if you decide to leave the bank after six months. You'll also receive a £250 interest-free overdraft. You will need to pay at least £1,000 into the account each month or hold another First Direct product such as a mortgage or savings account.
Please note: Any rates or deals mentioned in this article were available at the time of writing.