Money Insider: Changing banks is not like switching energy providers
Saturday 09 April 2011
I was surprised to learn that there is a lack of choice and competition in the retail banking sector, according to the latest findings of the Treasury Committee.
It sounds as if it is banging the same old drum we have become accustomed to over the last decade with no new startling revelations or anything that would really be considered as news. The crux of the issue appears to be that it is difficult for consumers to work out how much their banking services cost them and that the process of transferring their current account is a cumbersome and risky process.
If you keep your current account in the black then it's quite simple, there are no bank charges to worry about, and yes I agree that in reality the banks are making money by paying you little or no interest on your current account credit balance. But by the same token you are not being charged for online banking, the convenience of payment mechanisms, including direct debits, standing orders and debit cards, plus access to a vast network of ATMs.
If you apply for an agreed overdraft limit on your account you will receive written confirmation of the charges that will become payable, the problem of comparison is far more of an issue when it comes to unauthorised borrowing charges, but why should that be the factor that leads you to choose where to bank? After all, surely nobody sets out with the intention of deliberately exceeding their overdraft limit.
There is no shortage of competition in the current account market with a number of high-profile providers even offering financial incentives to switch. As for the process being "cumbersome and risky", is this really the reason that people don't move their current account on a frequent basis? Or is it more down to media scare stories or perhaps that they don't see their current account as something they wish to move from provider to provider at a drop of a hat.
Switching your energy, telephone or broadband provider may be the norm to save a few pounds but switching current accounts in the same way or frequency just isn't going to happen.
Most banks have dedicated switching teams in place and will guarantee that you will not incur any charges due to the transfer process. However, the thought of moving your direct debits and standing orders, a new debit card and Pin and new internet banking to get used to are more likely to be the barrier rather than a lack of competition and choice in the market.
I'm not sure what the Treasury Committee expects a new entrant to do differently; they too will still be strangled by consumer credit regulation that automatically doubles the word count of any customer literature.
It's easier to be different when you're a new player with a handful of branches and a few thousand customers, but when you build a larger, more complex customer base over a number of years, the initial gimmicks that set you apart from the "big boring banks" will be cast aside in search of a better profit margin and a need to satisfy the City in fear that your share price will suffer.
If there's no competition out there at the moment, I would like to know what you call it, providers have been falling over themselves in the last 12 to 18 months, offering loyalty incentives to their current account customers, realising at long last that looking after existing customers is equally as important as recruiting new ones.
AA leads the way as new ISAs launched
Just a few days into the new tax year, it's no surprise to see much of the marketing is still focused on the ISA market.
Some of the more notable accounts to hit the shelves this week include the re-launch of the table-topping instant access ISA from AA at 3.35% AER, although it doesn't permit the transfer in of previous ISA balances.
Looking at fixed-rate, tax-free savings, Birmingham Midshires is paying 5% AER for a five-year fix and includes a useful monthly interest option as well as allowing you to transfer in.
If five years is perhaps too long to consider, maybe the best-buy three-year fix from Leeds Building Society at 4.16% AER will appeal, again it is for new ISA money only, but it does offer the flexibility of penalty free access to 25% of your capital.
If you're an existing saver with Nationwide Building Society, you'll have the option to open a three-year fixed-rate loyalty ISA at 4.2% AER, 0.35% higher than the non-customer equivalent. Although again there is a maximum balance restriction of £5,340 (the 2011/12 cash limit)
Andrew Hagger is a money analyst at Moneynet.co.uk
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Bargain Hunter: From The Outsider to 1984, catch a cut-price classic, read it in the rye
Donald MacInnes: My wasted hours in the retail deserts of Dixons-Carphone
Energy switching app Voltz allows users to switch with just a few taps
Money Insider: Smart alternatives to the pensioner bond
- 1 The truth about 'girl things': Three cheers for Heather Watson's honesty
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 3 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 4 Tennis fan suing Australian Open organisers for 'failing to shade spectators' during Murray match
- 5 Men behaving badly: Urinating while standing, 'manspreading' and the gendering of selfishness
British Muslim leaders outraged after Eric Pickles says followers of Islam should 'prove their identity'
UK terror fears: My jihadist son returned from Syria mentally scarred – now he is being ignored
Nigel Farage: NHS might have to be replaced by private health insurance
Billy Crystal: 'Stop shoving gay sex scenes in my face'
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village