The perks on offer from many current accounts, from switching bonuses to cashback, have been slashed. Now's the time to find a better account.
As a nation, we aren’t enormously keen on switching bank accounts.
According to the Current Account Switch Service, more than 113,000 current account switches took place in March. That’s not exactly a huge number, yet it’s the third-highest on record and the highest seen since March 2016.
But the truth is that I can’t remember a time when banks were stripping back the worthwhile features of their accounts to such an extent as they are today.
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Interest dwindling
In this age of the low-interest rate, current accounts have been a useful option for savers irritated by the small returns on offer from dedicated savings deals.
While easy access accounts have paid little more than 1%, banks and building societies have paid up to 5%, albeit on more limited balances.
Not any longer, with Nationwide the last provider to turn the lights off on 5% deals last month. There are now no accounts paying more than 2% and even then it’s only on the first couple of grand in your account.
Don’t get me wrong, that’s still superior to an awful lot of accounts that claim to be for savers, paying a laughable 0.01%. But it’s still quite the drop from what we’ve bee accustomed to over the last few years.
The disappearing switching bonus
Another incentive to move current accounts has been the switching bonus. Nothing fancy about them ‒ switch your main account over to a new provider and to welcome you, they will hand you up to £200.
Lovely.
Trouble is, they have all gone.
Some of the banks that were offering them ‒ the likes of HSBC and NatWest ‒ have dropped the offers entirely, while others, like First Direct, have simply stopped taking on new customers altogether.
The days of the golden handshake to welcome you as a new customer are, at best, on pause.
Make switching savings easier with Raisin UK
Cashback? What cashback?
A further perk that comes with some current accounts is the ability to earn cashback, whether on your direct debits or simply as a result of having the account.
It’s another area that’s become less enticing though.
Santander, who led the way with the direct debit cashback idea, is dramatically restricting how generous its 123 account is from next week by capping the monthly cashback at a maximum of £15. And even that will be beyond most account holders.
Halifax has also recently revamped the way cashback works on its Reward current account.
While you can potentially increase the amount you bring in each month from £2 to £5, there are now far more hoops to jump through in order to do so, including having to pay in £1,500 a month rather than £750 and maintain a balance above £5,000 or make payments worth £500 with your debit card.
In other words, there’s a lot more work involved for the sake of hopefully pocketing an additional £3 a month.
Thankfully there are still accounts out there paying cashback to account holders, but the level of choice has undoubtedly been stripped back.
Check out our round-ups of the best bank accounts for cashback and consider topping up what you can earn with a cashback website.
‘Fairer’ overdrafts
In the background we also have the huge rejig of how banks and building societies operate ‒ and charge for ‒ their overdrafts.
While they have all agreed to offer interest-free buffers for a couple of months due to the Coronavirus situation, the interest rates charged on those overdrafts are being hiked as a result of new rules from the FCA which force providers to treat people in authorised and unauthorised overdrafts the same way.
Essentially, in order to protect those with unauthorised overdrafts from being milked, now everyone who drops into the red will have to pay ridiculous rates of around 40%.
And the fact is that once those interest-free periods end, there will be a LOT more people in the red than was previously the case.
If you’re someone who dips into an overdraft occasionally, it’s never been more important to understand precisely what your bank charges and find an account with a permanent interest-free buffer that means you aren’t going to get hit with ludicrous charges.
For more on how overdrafts are changing, check out New ‘simple’ overdrafts reveal what a rip-off they are.
Don’t just make do
With banks stripping back what they are offering, there are now an awful lot of mediocre ‒ and frankly naff ‒ current accounts out there.
As a result, there’s never been a more important time to make sure that the account you have is above average and actually delivers something you need.
While the leading accounts are not quite as enticing as they once were, they stand out more now because of the sea of 'meh' which surrounds them.
And let’s be honest, most of us have the time to actually devote towards finding a new bank account at the moment.
Make switching savings easier with Raisin UK
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