Is Direct Debit to blame for banking inertia?

The hassle people think will be caused by moving Direct Debits is the main reason customers do not switch their bank accounts, according to research conducted by YouGov for Abbey.

YouGov surveyed 3740 people to understand the reasons they do not switch. 65% cited the hassle of switching accounts because of transferring Direct Debits or standing orders, while 49% believed there was no benefit since all banks are similar. 29% feared losing their personal relationship with their bank, while 26% believed banks would not help them transfer. A further 24% believed a new provider would not offer the same level of facilities as their current bank.

Steve Shore, Abbey’s Head of Banking Marketing, said: “Banking inertia remains a problem. People are still more likely to move house or change partner than switch current account.

“It is fascinating that Direct Debits and standing orders– functions which have helped people manage their accounts better – seem to be driving bank inertia. The perception remains that account switching is complicated and ridden with potential pitfalls. However, it is extremely easy to switch accounts, with Direct Debits and standing orders automatically transferred. Indeed, 90% of those surveyed who had moved banks stated it was very easy or fairly easy to switch to a new account.

“The difference between best and worst current account rates is significant. Customers who fail to switch will be missing out.”

Switching accounts

Abbey’s switching process is simple. Customers need only sign a form and Abbey will transfer the customer’s Direct Debits and standing orders. Abbey informs the customer of the progress of the transfer and if Abbey makes a mistake during the transfer process which means that the customer is charged – either by Abbey or the bank from which they’re moving – the charge will be refunded in full.

Rate Differences

The major banks (Royal Bank of Scotland, Natwest, Barclays and HSBC) offer 0.1% interest on their main current accounts. Abbey’s standard current account rate is 25 times higher, at 2.5% AER.

Abbey is offering six percent gross AER for people switching to Abbey using its account transfer process on balances up to £1000. Customers need simply pay in at least £1,000 a month.

People interested in moving their bank account can go to abbey.com for more information.