But The Payment Council’s Current Account Switch Service, (as 7-day switch is officially known), was also a trigger for banks to start producing better deals. This means you now can earn as much as 5% on cash in your current account – perfect for anyone suffering years of terrible returns on savings accounts.
Not yet up to speed on the new wave of improved current accounts? Take a look at how savvy consumers are using the 7-day switch to make the most of their money – and how you can join them.
Gimme five (percent)
The idea behind the 7-day switch was to make it easier and faster for people to move to a new current account – you can read more about what changed regarding the process here. The government was hoping that an effect of the new rules would be for account providers to up their game in their bid to compete for newly ‘footloose’ customers.
It certainly did the trick. According to the Payments Council, switching levels are up by 16% when you compare the first six months of this year to the same months last year.
And more importantly, banks really did start fighting harder for your business (Laura Howard takes a look at the winners and losers here) in the form of better current account deals.
For example, both Nationwide and TSB no offer current accounts that pay 5% on in-credit balances, dwarfing the rates of even the leading easy-access savings accounts which can only muster 1.5% AER.
- 5% on cash: Both the FlexDirect account from Nationwide and the Classic Plus Account from TSB offer the same rate of 5%, on balances of up to £2,500 and £2,000 respectively. Nationwide’s deal only lasts for 12 months though, while TSB’s is ongoing.
- 4% on cash: Lloyds Bank’s Club Lloyds Current Account pays 4% on balances between £4,000 and £5,000 if you make it your main account.
It’s for these kinds of deals that consumers are most likely to ditch their existing current account for. Our analysis found 27% of would-be switchers are searching for accounts that pay interest on credit balances.
Our head of banking, Kevin Mountford, said: “High in-credit interest rates is the main driver for people to switch current accounts – no doubt fuelled by the fact savings rates are so low at the moment.”
Easy as one, two, three...
But there's other motivations too.
One-in-five (20%) of our users are searching for an account offering cashback, one-in-10 want a bank with a good reputation for customer service, and 8% are looking for a better overdraft facility. So what’s out there for them?
Cashback AND 3% interest: Santander 123 Current Account pays up to 3% AER on credit balances between £3,000 and £20,000. It also pays cashback when you use the account to pay your household bills.
For example, you’ll earn 3% cashback on your mobile phone, home phone, broadband and pay-TV direct debits; 2% on your gas and electricity direct debits; and 1% on your water and council tax payments. Santander mortgage payers also earn 1% cashback. There is a monthly fee of £2 on this account.
Earn £££s just to switch: Some accounts will pay you simply for switching, rather than spending. For example, you can bag £125 worth of M&S vouchers simply by switching to the M&S Current Account via MoneySuperMarket.
You can read more details in Melanie Wright’s review but there’s no purchase necessary to qualify for the £125 freebie, plus you can earn M&S loyalty points when you use your debit card.
Halifax’s Reward Current Account will pay you £100 for switching and reward you with £5 a month thereafter as long as you pay in at least £750 each month, stay in credit and pay out two direct debits from the account. It also pays up to 15% cashback when you use your debit card.
First Direct also offers a cash incentive to new customers, paying £100 cashback when you switch to its 1st account. However, your balance won’t earn you any interest and you have to pay in at least £1,000 each month.
Better customer service: For those who care about customer service, First Direct was also voted “great” by 92% of those who voted in a Money Saving Expert poll. And the internet bank must be pretty confident you’ll be happy, because, as well as the £100 hello for switching, it pays a further £100 if you decide to leave again within 12 months.
If you’re looking for a current account with a decent overdraft facility, the already-mentioned FlexDirect account from Nationwide offers a fee-free arranged overdraft for 12 months.
Start taking advantage
If you’re among those who’ve missed out on 12 months or more worth of great current account deals, don’t worry – the 7-day switch is here to stay, and so the providers are going to have to keep working hard to compete with one another for your business.
Head over to our current accounts channel to start taking advantage today.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.