By Lyndsey Hall
Switching bank accounts and suppliers has never been easier, and new customer offers are often incredibly attractive, but is it always smart to switch?
Make the switch: Banks
The current account switch service was launched back in 2013 and now covers over 99% of UK bank accounts. The service allows users to choose a new account and have all their cash, standing orders and direct debits transferred across in just seven days. You could even switch accounts if you have an overdraft.
According to the latest figures, almost 5 million accounts have been switched since the service launched five years ago, with more than 40 banks and building societies taking part. In the twelve months between July 2017 and June 2018, over 965,000 switches were made, up 6 per cent on the previous period. Almost half a million switches were completed in the first half of 2018 alone, an increase of 7 per cent compared to the same period in 2017.
It’s not just personal accounts that come under the scheme, business accounts can also be switched in just seven days. Small businesses, charities and trusts with fifty employees or less and an annual turnover of less than £6.5 million can use the switching service and move their financial affairs to a new bank, fuss-free.
Should you switch?
Over 57 million payments have been redirected since the current account switch service launched, boasting a seven day switching success rate of 98.7 per cent. Of those surveyed during Q2 2018, 94 per cent of those who switched their current account in the last three years said they were satisfied with the process.
Switching to a new account could net you a whole raft of benefits, including cashback, gift cards, rewards for spending, competitive overdraft rates and high interest rates on savings. However, switching to a new account could negatively impact your credit rating, especially if you switch regularly. The longer your accounts have been open and running effectively, the better your credit rating will be, so if you’re planning to take out any large loans or apply for finance in the not-so-distant future, you may want to delay switching until after you’ve secured the borrowing you require.
Make the switch: Suppliers
Utility companies also tend to reward new customers, and loyal, long-term customers are effectively penalised for staying with the same company. According to an investigation into the “price of loyalty” by Citizens Advice, loyal consumers are being ripped off to the tune of £4.1 billion. The organisation has now made a “super-complaint” to the Competition and Markets Authority (CMA), with supporting evidence showing people are paying too much for mobile, broadband, home insurance, savings and mortgage bills because they’re loyal to their provider.
The investigation found that vulnerable people, including the elderly, disabled and those on low incomes or without a University education, are less likely to switch. As a result, they could be paying as much as £1,000 a year more than new customers – a sum which amounts to the equivalent of four months’ food for the average household.
In light of the complaint, the Financial Conduct Authority (FCA) has now announced that it will investigate whether loyal customers are paying too much for car and home insurance. Whilst the CMA intends to publish a response within 90 days on completion of its own investigation.
Should you switch?
A new price cap on energy will cut bills for loyal customers by an average of £75, and water bills across the country will be dropping from 2020 after pressure from the regulator Ofwat and environment minister Michael Gove.
Citizens Advice, Ofgem and Money Saving Expert are just a few of the organisations that recommend shopping around for the best deal when it comes to utilities, and never letting a contract auto-renew. The last super-complaint (against PPI in 2005) resulted in more than £30 billion being returned to customers, but that doesn’t necessarily mean the same thing will happen again, so it’s best to keep an eye on your contracts and make sure to compare prices when your renewal date approaches.
There are lots of sites that allow you compare all the available providers for a particular product or service nowadays – you’ve almost definitely seen an advert for Compare the Market or Go Compare on the telly. Switching energy suppliers is rarely difficult, although there are usually exit fees if you try to leave mid-contract so it’s a good idea to wait out your current one. It can take around three weeks for the switch to take place, so if you’re moving house it makes sense to start the process before you move.
Switching is a much simpler process than it used to be, and almost always pays off, so don’t be daunted. Do your research, and make the switch.