How switching current accounts could earn investors much needed cash for a raining day
Current accounts are simply bank accounts which give investors instant access to their cash when they need it. According to research from high street stalwart Alliance & Leicester, six out of 10 adults have never switched their current account and 84% said they have no plans in doing so over the next 12 months.
Banks provide current accounts that actually pay little or no interest. There are 54 million current accounts in the UK and the banks know that once a customer’s signed up, they aren’t likely to move elsewhere which means they can get away with offering uncompetitive deals.
Added to this, a few years ago, banks gained the ability to automatically transfer direct debits and standing orders, making switching much easier. It usually takes between four and six weeks for everything to be transferred over.
If investors are willing to sacrifice an hour of their time to choose an alternative bank and visit it to open their new account however, they could make free cash of up to £200 as a bonus, or boost their interest for a year to 5% in-credit and 0% overdrawn, for the small inconvenience of switching.
So, in real terms what incentives are on offer for customers willing to make the switch? New customers wishing to switch to a Co-op current account can earn themselves a princely sum of £200 for changing as long as they pay in earnings of at least £800 a month. Clauses requesting that investors deposit their wages into a current account are common, with the Co-op's £9,600 a year demand at the lower end of the scale.
Apart from this, the internet bank First Direct offers a lower £100 incentive to customers who open its current account. Prior to Co-op’s offer, First Direct’s offer was the highest switching reward on the market except for the Santander’s pledge of: £100; £200; or in cases where the customer already has a mortgage and savings account with the lender, £300; for switching to its current account. It’s been widely reported that Santander’s customer service hasn’t been the best historically, though the overall number of complaints that the bank receives has fallen in recent months.
The Co-op and First Direct, by contrast, always fare well in customer satisfaction surveys, while the Co-op in particular prides itself on having an ethical stance, a refreshing change in a climate where many banks make immoral investments to boost their profits.
Half of all bank current accounts pay no interest at all on credit balances and most of the remaining ones offer very low rates of interest. With those offering top rates on savings you usually have to deposit a certain amount of money in the account every month. If you fail to do this, interest may be withdrawn or you may even have to forfeit a monthly "under funding" fee. Bear in mind too that even if you do satisfy the minimum deposit requirements, high interest rates are likely to last only 12 months.
There are actually more fee-charging current accounts than free ones on the market. Usually known as packaged accounts, in return for the fee, they offer a range of benefits such as free travel insurance and breakdown cover. Before opting for this type of account, investors need to decide whether the benefits on offer outweigh the fees.
A good bank account is central to the smooth running of investors’ finances. The service they receive is therefore a powerful differentiator when comparing one account to another. Consumer protection groups regularly run polls to discover which banks treat their customers well. Online banks such as First Direct and Smile regularly come out top.
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