Simon Read: I'm too frightened to switch my bank account, but I will
There's a bit of advice that is common to thousands of personal-finance articles. It's simply this: switch. Switch energy supplier if your tariff is too expensive. Switch bank if your charges are too high. Switch savings account if your interest is too low. And so on.
Just last week in this column I had, as regular readers will recall, a bit of a rant about banks ripping us off with poor service and high charges on current accounts.
I ended the piece with a call to arms. I wrote: "We should put pressure on the big banks by switching to rivals."
Now I have a confession. I have remained with the same bank for decades. Not because it offers good service. Far from it. And not because it offers a great deal. Again, the account I have would be, in any terms, some distance from the best-buy tables.
So does that make me a hypocrite? I would hope not. I see my job as pointing out the best deals and shedding light on the rip-offs. If I fail to act on the articles I write, then more fool me. In short, do as I say, not what I do.
But why, knowing that there are much better deals out there, have I not changed bank accounts? After all, I regularly change my energy supplier and mobile firm. So why is a current account different?
Frankly it's fear. I'm frightened that my direct debits and standing orders will disappear and that any new bank will not allow me to dip into the red when I need to. I'm used to the convenience of my bank's online operation and I'm concerned that it could lead to cock-ups were I to move my account elsewhere.
I had a letter from a Middlesbrough reader this week that fed my fears. Jennifer Gregory's decision to switch banks last year left her facing overdraft charges for the first time in her life and, she reports, she's had a bank account for some 50 years.
The problems began with her switch from the Halifax to Co-operative in December when, she says, "my entire balance disappeared and then reappeared after three or four days".
If that wasn't alarming enough, two direct debits then failed, as neither of the bank accounts had money in them to meet the demands. That lead to extra interest charges from her credit-card company for the subsequent late payment when she eventually managed to sort things out.
Next problem was Jennifer's state pension. In late December she discovered that four payments had failed to reach her account, pushing her into the red. The bank blamed the error on the Department for Work and Pensions' being given the wrong account number but, to its credit, agreed to waive the overdraft charges it had automatically added to her account.
I've always suspected that things can easily go wrong when people switch accounts, and Jennifer's story bears that out. Her new bank can, no doubt, easily explain away all the problems and, I'm pleased to say, was understanding about scrapping the charges she faced.
It's quite possible that the fault for the problems lies with neither of the banks. But the fact is that the search for a better bank led Jennifer into a situation which she says gave her "substantial stress". She understandably adds that she will think hard before switching again.
Jennifer's story is one of millions and there are certainly plenty of people who will report that switching current accounts went without a hitch for them. I still hope to add myself to that satisfied list one day, but until I'm confident that I can switch banks without completely messing up my finances, then I'll remain one of the many who, for psychological reasons, are yet to embrace a better banking deal.
Thinking about it, having now aired my weakness, I feel emboldened to confront it. I will look into switching current accounts and will report back on how easy and painless it almost certainly will be.
Which leads me on to another reader, Fiona, who says she was forced to change her bank account. Why? It was because of a series of problems she had with payday lenders when she ended up borrowing more and more money from different companies simply to pay off the debt and growing interest.
Because of the continuous payment authorities that most lenders make borrowers sign, the firms are effectively allowed to help themselves to cash in people's accounts. I've warned about this in the past but, essentially, it means that money people may earmark for rent or bills disappears as it is snapped up by the payday lenders.
To stop that happening, Fiona opened a new account. But then some money owed to her was paid into her old account. Before she could use it to pay her electricity bill this week, lenders beat her to it with Wonga taking £75 and Quik.co.uk £25.
"It's not fair that these people can help themselves without my knowledge," Fiona says.
I agree. It's time we outlawed the mis-use of continuous payment authorities. But how can we control the payday lenders?
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