Higher interest rates the lure to switch, says MoneySuperMarket
Around a quarter of banking customers are looking to switch their current account, with higher interest rates on credit balances the main lure, according to new research from MoneySuperMarket.
One year on from the introduction of the Current Account Switching Guarantee, the group’s research found that over a quarter of consumers (27 per cent) are looking for a current account offering in-credit interest. A further one in five (20 per cent) want an account that offers cashback, and one in ten are incentivised to shop around because of the customer service provided or the benefits that come with it (10 per cent respectively). Only eight per cent are looking for a current account for the overdraft facility on offer.
The analysis also compared current account interest rates against those of savings accounts, and found that savvy consumers could currently earn over three times more interest with one of the top paying current accounts, in preference to a a top easy access savings account. Both Nationwide and TSB offer current accounts with in-credit interest rates of five per cent, whereas the leading easy access account pays just 1.50 per cent AER. Nationwide’s FlexDirect account currently offers five per cent AER on balances up to £2,500, while TSB Classic Plus Account also offers the same rate on balances up to £2,000, the group said.
MoneySuperMarket also highlighted a number of current accounts with attractive benefits. It pointed to the M&S Bank current account, which offers a £125 M&S gift card when customers switch their current account exclusively through the MoneySuperMarket site. Consumers who move to Halifax’s Reward Current Account would also benefit from a £5 per month reward and up to 15 per cent cashback when using their debit card. Halifax also offers £100 to those using its dedicated switching service.
Kevin Mountford, head of banking at MoneySuperMarket, said: “As our research shows, high in-credit interest rates are the main driver for encouraging people to switch current accounts, no doubt fuelled by the fact savings rates are so low at the moment. The implementation of the Seven Day Switching Guarantee last year certainly stoked the fire in the current account market, with many providers stepping up their offers to entice consumers to switch. New products continue to be launched with some offering competitive interest rates of up to five per cent. In comparison, easy access savings accounts don’t look so appealing, with the leading interest rate on easy access accounts reaching just 1.50 per cent. For many savers, the return on your money will be much higher in a current account than a standard savings account. However, ISAs should still be the first port of call for savers due to the tax free benefits on offer.”