5 reasons why you should ditch your current account

Three-quarters of Brits have never even thought about switching banks. Here are five reasons why you should.

According to new research from Consumer Focus, 75% of you have never even so much as considered switching your current account. What’s more, a further 17% - more than eight million accountholders - have thought about switching, but are reluctant to do so because of the perceived hassle, the concern that things will go wrong in the switching process, and the belief that switching could have a negative effect on credit rating.

Interestingly, we’re less willing to turn our backs on our bank than other types of consumer services. The table below outlines how services have been switched during the last 24 months:

More than four times as many people have moved to a new energy provider than have switched banks over the last two years. And telecoms, such as broadband, landline and mobile phone, are also ditched and switched far more frequently than current accounts.

The Consumer Focus research concluded nearly one in three consumers thought all banks were the same, making moving to a new bank pretty pointless. But I think this ‘out of the frying pan, into the fire’ attitude isn't quite right. Here are five very good reasons why you should switch:

Poor customer service

When it comes to customer service, all banks are most definitely not the same. Numerous bank customer satisfaction surveys have revealed the same results: The big boys have got far too big for their boots with the likes of Santander, the Lloyds Banking Group and Barclays running up far more customer complaints than any other bank, even relative to their size.

One bank which always seems to come out on top is online outfit First Direct which has won more than 30 customer service awards. You can find out why in Britain’s worst bank revealed which covers the best and worst banks in the country.

If you like what you read, you’ll be pleased to know that anyone switching to the First Direct 1st Account now will benefit from a £100 cash bonus (as long as they fund the account with at least £1,500 a month).

Poor in credit rates

If low rates of interest on your balance really get your goat, then I’m afraid First Direct won’t be for you since the 1st Account doesn’t pay a return on your cash at all. Santander may not have the best reputation for customer service, but it does have a fantastic high interest current account on offer. With the Santander Preferred In Credit Rate Account you’ll earn a really generous rate of 5% on the first £2,500 of your balance. What’s more, this rate is fixed for the next 12 months, and you’ll get a £100 switching bonus.

But there’s a downside: You won’t earn any interest on the excess balance over £2,500, and the fixed rate of return will drop off to just 1% after 12 months. You’ll also need to credit the account with a minimum of £1,000 every month.

Another good choice for high interest is the Lloyds TSB Classic with Vantage account. Again Lloyds doesn’t generally do well in the customer service stakes, but with rates of 4% on offer it’s not all bad. That said, it’s only suitable if you maintain a large balance because this top return only applies on the first £4,000 to £7,000. (Note you’ll need to pay in £1,000 a month.)

Finally, the Halifax Reward Current Account is also worth considering here because you’ll enjoy a £5 monthly reward as long as you pay in £1,000 a month. Better still, you’ll still qualify for the cash bonus whether you’re in credit or overdrawn.

Expensive overdrafts

If your account is in the red before payday arrives, it’s time to think about moving to avoid rip off overdraft charges. Right now, only one current account offers an interest-free overdraft facility: The Santander Preferred Overdraft Rate Account. Your existing overdraft can be matched up to £5,000 (depending on circumstances).

With this account, you’ll get 0% for 12 months which should allow some breathing space to get your account back into the black before the interest-free period ends. Bear in mind that at this point, the rate reverts to 12.9%.

You’re paying a premium

I’m really not a fan of packaged current accounts. These are the type of accounts which provide a range of ‘exclusive’ benefits such as free travel insurance and AA breakdown cover and charge anything up to £25 a month for the privilege. In my opinion the benefits really don’t justify the cost, and there’s no evidence to suggest premium banking customers are treated any better than ordinary customers. You can find out more about this ridiculously expensive way to bank in Ditch these awful current accounts.

If you’re already paying for a packaged account, unless you really are taking full advantage of all the freebies on offer, I suggest you think about switching to one of the options mentioned above which don’t charge a penny.

Lack of transparency

Finally, I would also suggest you steer clear of any bank which isn’t upfront about how it is profiting from your custom. For example, your bank should inform you when interest rates and charges on your current account change.

If you have a temporary bonus - such as the 5% fixed rate available from the Santander Preferred In Credit Rate Account - you should be warned when it is due to expire. Even more importantly, you should be made fully aware of overdraft charges. If you feel you’re being kept in the dark, move to a bank which takes transparency more seriously.

If these five reasons have got you thinking perhaps switching is right for you after all, don’t forget many banks operate a specific switching process which should help to make the process run more smoothly. I can’t deny things do sometimes go wrong with the occasional forgotten direct debit or standing order. So do keep a close eye on the process to make sure your new bank doesn’t slip up.

Compare current accounts at lovemoney.com

More: The current account with the full package | Good news for everyone with a current account