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Current account market hotting up - get £150 to switch to number 1 service bank

1st September 2015 Print

From today, anyone who wants to switch their bank account can get £150 cashback if they move to First Direct’s 1st Account. Available to apply exclusively through MoneySuperMarket, consumers can switch to a bank renowned for excellent customer service and receive £150 as a thank you.  In addition, the account comes with a £250 interest-free overdraft which could come in handy for those who dip into the red.

Competition in the market is fierce, with providers increasingly looking to offer bigger and better incentives. Clydesdale and Yorkshire Bank, for example, offers the same £150 for switching to its current accounts, plus if you stay in credit, both pay 2.00 per cent AER on balances up to £2,000. Alternatively, TSB’s Classic Plus current account offers a more competitive rate of in-credit interest at 5.00 per cent AER on balances up to £2,000.

For those who want to keep a much larger balance in their account, the Santander 123 current account pays 3.00 per cent AER (variable) on balances between £3,000 and £20,000 – far higher than the best savings accounts on the market. This account also pays cashback of up to 3.00% on a number of household bills.

Despite these highly tempting offers, almost 80 per cent of current account holders have not switched in the last year and over half of all customers have been with the same bank for over 10 years.  In addition, recent FCA research found that the effort involved in opening a new current account is a major switching barrier for people.

Peter Harrison, Head of Money at MoneySuperMarket, offers advice on overcoming these barriers when looking for a new current account.

Myth 1: Switching is difficult and too complex

“Many people are put off switching by the perception that it is a complex process and not worth the hassle. The seven day switching rules introduced two years ago have made this much easier and quicker, with banks having dedicated teams to ensure the move runs smoothly and is completed within seven days. The seven day switch has so far spurred 1.75 million people into changing their current account, but this is still a very small proportion of people who have switched.

Myth 2: Changing all my direct debits over to my new provider will take too long and is a hassle

“Many people think that if they switch current accounts, they will have to move all their direct debits and standing orders across to their new account themselves. This can seem like a hugely daunting task, and it is for this reason so many people don’t switch. However, once you have found which current account suits you best, and you have agreed a switch date, your new bank will take care of moving across all outgoing payments, including direct debits and standing orders, as well as incoming payments such as your pension or salary, from your old account. This will all be carried out - and the switch completed - in seven working days, unless you specify a later date.”

Myth 3: I can’t switch because I have an overdraft

“You can move banks even if you have an overdraft - provided you can show you have used it sensibly. Banks are unlikely to want to take on someone who has regularly gone overdrawn without agreeing it in advance, but provided you've always stayed within your authorised limit there shouldn't be any reason for them to turn you down.”

Myth 4: Switching current accounts will cost me money

“Switching current accounts won’t cost you a penny. Should you incur a fee or you pay (or lose) interest as a result of a mistake being made during the switching process, it will be refunded to you by your new bank.”

Peter Harrison, head of money at MoneySuperMarket, concludes:“Ultimately, people need different things from their current account, some are always in credit so should look for big cash incentives and in-credit interest, but others will need to check how much they will be charged for using an overdraft. For others, it’s not about how much you can earn or save, but about the search for better customer service. The First Direct deal is a corker as it offers both one of the biggest cash incentives we’ve seen for a long time, and is notoriously popular with customers wanting to be looked after”