Friday, 20 September 2013

SWIFTER SWITCHING

The new swifter switching system for current bank accounts was launched this week. But I was very sceptical when the Money Advice Service said that some people could save hundreds of pounds by changing their current account. The MAS (you may have seen its ‘ask MA’ adverts) was set up by Government but is (reluctantly) paid for by the financial services industry.

To mark the start of swifter switching MAS has taken on the difficult task of comparing current accounts and producing a league table of the costs and benefits. It uses information provided daily by the banks to work out the amount of interest – if any – paid and the charges for overdrafts.

The online system allows you to input details of your current account use – how much goes in each month, the typical balance at the end of the  month, and how often you slip into an unauthorised overdraft or exceed an approved overdraft limit. MAS then produces a list of more than 60 current account ranked from the most expensive to the cheapest for those circumstances. 

The results surprised me.

For example, if you pay in £2000 a month, typically have a £250 overdraft at the end of the month and slip six times a year over your overdraft limit the cost can range from nothing (in the first year) via around £150 to £400 with various accounts in major High Street banks to a whopping £1268 with the most expensive. So if you are with the wrong bank moving to the best could save you hundreds of pounds.

And if you are the kind of person who is always in credit with £3000 a month going in and a balance typically of £5000 then the best account will be worth £181 a year minus a £24 fee and the worst – which is most of them – will pay you nothing and charge you nothing.

Of course the results are just a guide and it is hard for anyone to predict what the pattern of their current account use will be in the future. But the tables certainly show just how much better off switching can make you. Try it http://compare.moneyadviceservice.org.uk/currentaccounts/Step1

If you are worried more about ethics than making money then another list provided by the not for profit group Move Your Money may prove useful. It ranks around 90 banks and building societies that provide current or savings accounts using measures which it calls honesty, customer service, culture, supporting the economy, and ethics. On current accounts three building societies take top places with scores of more than 75 out of 100 and two smaller branch-based banks are also in the top ten. At the bottom of the list are the main High Street banks with Barclays taking the worst spot with a score of just 4 out of 100. Try it out at http://moveyourmoney.org.uk which also explains how the scores are worked out and why each bank or building society gets the score it does. 

If you’re feeling twitchy about switching these two websites can at least give some guidance over what you might gain – in cash and a warm fuzzy feeling.

Details of the current account switching service which moves your account in around nine days (seven working days) and promises a refund of any fees or penalties if things go wrong http://www.paymentscouncil.org.uk/switch_service/

The future
Although the new switching service is better than the longer and less certain process we had, it is not what a truly competitive market needs. The only real solution to the lack of competition is full bank account number portability so your unique sortcode+account number would stay with you when you switched from one bank to another. No-one who paid money in or took it out would even know you had changed banks as they would use the same number. But your account on that number would simply be looked after by your new bank. It would be similar to the portability of mobile phone numbers which allows means you to change provider but keep the same number. 

And if another two digits were added to the 14 digit sortcode+account number - making it the same length as a credit card number - then it could contain what is called a checksum digit. That checks that any number is genuine and would end the misery of mistyping a recipient's bank account number and finding your money had gone to a stranger who might resist its return. 

The banks have rejected number portability several times. But one day....

1 comment:

  1. We have a great deal via Lloyds. We have a Gold joint account that cost £13 per month, for which we get lower overdraft fees, mobile phone insurance, AA recovery, Europe wide travel insurance and so the list goes on. Making the money back on the mobile phone insurance alone.

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