Why now is the time to switch your current account

More than two million people have moved their current accounts since the launch of the Current Account Switch Service two years ago. But what would persuade YOU to switch your current account?

tbc

For most of us, it seems generous interest rates provide the biggest incentive to move providers.

New MoneySuperMarket research, which asked what customers look for when choosing an account, reveals that two-fifths of us (41%) now prioritise high in-credit interest above anything else, up from a quarter (27%) last year.

Why returns matter

Many savings accounts offer paltry returns, so it’s not hard to see why high current account returns have become so important to us.

Take the market-leading easy access account from Kent Reliance Building Society. You’ll earn an annual equivalent rate (AER) of just 1.65% if you stash your cash in this account.

Put it into a Nationwide or TSB current account and you’ll earn an impressive 5% AER – more than three times the amount of interest you’d receive from the Kent Reliance account.

Kevin Mountford, head of banking at MoneySuperMarket, said: “The importance of high in-credit interest rates has soared, which isn’t a surprise as the interest available on easy access savings accounts remains so low.

“The introduction of the Current Account Switch Service has definitely driven banks to be more innovative and keen to offer attractive incentives resulting in a market rife with competition.

“The service has also motivated consumers to seek out accounts that suit their needs and boosted peoples’ confidence to move to a new bank given the ease they can do this now the service is in place.”

Check the small print

While high current account returns are tempting, always read the terms and conditions before you switch.

For example, Nationwide’s FlexDirect account only pays the 5% rate on balances up to £2,500, while the TSB Classic Plus Account pays the same rate on balances up to £2,000.

If you’ve got a bigger savings pot, then Santander’s 123 account could be a better option, as it pays 3.00% AER on balances between £3,000 and £20,000.

Mr Mountford said: “Many of the higher in-credit rate current accounts require customers to meet a minimum funding amount, while some market leading savings deals have restrictions, so it is important know what those may be before you make the switch.”

When you check the small print, look out for the amount you'll have to pay in each month. Also be aware that you'll probably need to run two direct debits from the account.

You might also have to pay a monthly fee, which will eat into the amount of interest you earn.

Other reasons to move your current account

High in-credit interest rates aren’t the only thing that tempts us to switch current accounts.

The MoneySuperMarket research found that one in five of us (20%) are after cash bonus switching incentives, while another 20% want benefits and rewards from their current account.

Only 5% said they’d consider switching current accounts for better customer service, while 14% are attracted by overdraft facilities.

Best deals

Whatever your priority, there are lots of great current account offers to choose from.

Apply for First Direct’s 1st Account through MoneySuperMarket.com, for example, and you’ll collect a £150 cash bonus (terms and conditions apply).

Clydesdale and Yorkshire Bank also pays a £150 cash bonus when you switch your current account to it, while Halifax’s Reward Current Account gives you £125 cashback provided you use its dedicated switching service.

You’ll also earn up to 15% cashback when using your Halifax debit card at selected retailers, and receive a £5 monthly reward provided you meet certain conditions.

M&S rewards switchers to its current account with a £100 gift card – and if you switch via MoneySuperMarket you’ll also get a £10 Dine in for Two voucher. This account doesn’t pay interest, but it provides access to the 6% AER high interest rate M&S Monthly Saver account.

If you tend to dip into the red regularly, and an overdraft is more important to you than in-credit interest, then Nationwide’s FlexDirect account offers an interest-free overdraft for the first 12 months.

Backing for switching

Michael Chambers, chief executive of Bacs, the organisation behind the Current Account Switch Service, said: “Millions of people visit MoneySuperMarket each year to search for the most competitive and beneficial deals available.

“Consumers are increasingly aware of the options out there and that a current account with one provider is no longer something that necessarily has to be for life.”

Would someone you know enjoy this article? You can email it to them by clicking here.

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.

Did you enjoy that? Why not share this article

SAVE MONEY NOW

Other articles you might like

Popular guides