A price war among the big high street banks is in the offing as new rules meant to speed up current account transfers come into force today.
The new seven-day switching rule places the emphasis on the banks to ensure they complete the transfer of customers’ accounts within a week of receiving an instruction.
Previously, changing banks could take anything between 18 and 30 working days to carry out the transaction, which often meant a customer had to wait six weeks before the new bank account was up and running.
As a result, British consumers have been traditionally reluctant to switch providers, often sticking with the same bank throughout their lives.
Now, with quicker account switching, banks like Santander, Lloyds and the new de-merged TSB have been offering bumper incentives for customers moving to them, including upfront cash payments and preferential savings rates.
Gocompare.com’s banking expert Matt Sanders said: “This new guaranteed switching service is great news for bank and building society customers. It will bring down the barriers for people to move accounts and should make the whole experience hassle free. It will also, hopefully, be a wake-up call to the banking sector that if a customer isn’t happy with the service they receive, they are more likely to speak with their feet and change providers.”
Research from research from personal finance website OnTrees suggests that the annual switching rate could climb to eight per cent, more than double the current level. This means customers will on average switch their account once every 12 years – current-ly, the ratio is less than once every 25 years. What’s more, customers who stay loyal to their banks may find that they are barred from incentives given to tempt newcomers.
Charlotte Oates from OneTrees warns: “Just like the savings rate war that we saw before the financial crisis, banks often saved the best rates for new customers while paying existing customers derisory rates.
“We believe the same will happen in the current account market, so it will become even more important to review and switch your account provider regularly.”