I’m a great believer in being disloyal. Well, at least when it comes to businesses.
I’ve written quite a bit over the last few years about how you’ll end up paying more if you stick with broadband and insurance service providers. And you’ll get precisely nothing for staying loyal to many banks, energy firms and other key services you contract each year.
The good news is people are starting to vote with their feet to get a better deal. The Current Account Switching Service (CASS) has just announced that a record number of people switched accounts in the final three months of last year – 376,107 to be precise. This is a major improvement, but still a drop in the water. Far too many of us are languishing in bank accounts we’ve had for decades, because of fear of the new… or mistakes during the transfer.
One of the big motivations for switching accounts seems to have been a notable increase in the incentives available. I’ve looked at what’s available, and I can confirm that switching can be rather lucrative. So if you’re thinking about moving your current or savings accounts, here’s what you need to know.
The process of switching accounts is actually much smoother than you might think. When you open a new account, you choose a date to switch then your new bank takes care of the rest, including transferring over all of your regular payments. Any payments that go to the old account after this should be redirected too. CASS guarantees that you’ll be refunded by your new bank if you incur charges or missed interest due to errors. The whole process should take just seven days too.
Banks based in the UK must be regulated by the Financial Conduct Authority (FCA), which means you can go to the Financial Ombudsman Service (FOS) if things go wrong. You can also go to the Financial Services Compensation Scheme (FSCS) if the bank collapses, protecting you for up to £85,000 per person, per bank. But make sure you check that the new bank is UK regulated.
But what should you look for in a new bank or building society? If you’re after a cash bonus, then some banks are offering up to £200 for new customers. There are always caveats though. Some have minimum amounts you must pay in each month (or your wages). Others have rules around regular payments or how long you keep cash in the account. Watch out for account fees too. Other financial businesses offer cashback for regular payments. And finally, some banks are offering saving interest rates that are competitive (but check how long the rate is fixed for).
MoneySavingExpert has some great comparisons of all the options so you can find the best deal for you.
When I wrote about rising savings rates back in October, I had a huge response from readers. It’s clear that many people have money saved but are unsure about what to do with it.
One of the few advantages of inflation is the increase in savings rates. However, some of my expert colleagues are suggesting that the best rates of interest might be ending soon. So now is the time to weigh up what you want to do with your cash.
With savings, the main things to consider is when you are likely to need access to your cash should an emergency or financial necessity arise. Savings rates increase the longer you ‘lock in’ your money. So if you don’t touch your cash for a few years, you’ll get a better rate of interest. Some of these notice or fixed accounts lock in your cash for just a month or even seven days. Bear in mind though that these rates can change and will drop if inflation stabilises and reduces.
Looking at the latest rates, one-year fixes are going for up to 3.75% and five-year fixes are hitting 4.5%. But remember you may lose out if you take out the cash early.
Martyn James is a leading consumer rights campaigner, TV and radio broadcaster and journalist.