More current account customers switching banks than last year, figures reveal
The number of current account customers ditching their old bank and switching to a new one has been running at higher levels in 2016 than it was a year ago.
But with several popular current accounts set to slash their interest rates or perks, customers may find they have a poorer choice of alternatives to switch to in the coming months, experts have warned.
Some 802,036 customers switched current account between the start of January and the end of September, marking a 3% increase compared with the same period in 2015, according to new figures from payments body Bacs, which oversees the current account switching service.
Launched in September 2013, the switching service has taken some of the hassle out of moving current accounts. It has cut the length of time it takes to switch from up to 30 working days previously to seven.
Bacs said over 3.3 million switches had taken place since the scheme was launched. A total of 1.06 million switches were completed in the last 12 months, up 2% on a year earlier.
The perks and relatively high interest rates offered by some current accounts have given savers a haven for their cash at a time when returns on traditional savings accounts have been poor.
But, following the recent cut in the Bank of England base rate to 0.25%, some providers have confirmed they are cutting their perks or chopping their rates.
Santander, which has been seen as one of the big "winners" of the switching service, announced in August that it would halve an interest rate on its flagship 123 current account from 3% to 1.5%, from November 1.
Bacs's latest figures show that in the first quarter of 2016, Halifax made a net gain of over 47,000 customers using the switching service, while Nationwide Building Society piled on over 28,000 customers, Santander gained over 17,000 customers, HSBC gained more than 5,000 customers and TSB gained more than 4,000 customers.
Meanwhile, Barclays made a net loss of more than 34,000 customers, NatWest lost more than 22,000 customers and Lloyds Bank lost more than 18,000 customers.
The figures covering providers only include people, small charities and small businesses that have used the switching service, not everyone who has moved their current account.
Rachel Springall, a finance expert at Moneyfacts.co.uk, said: "Over the past few weeks, some of the biggest banks have announced they will be slashing the credit interest on the most lucrative accounts, which will be devastating news to customers taking full advantage of the perks, particularly to savers who use these accounts as a refuge for their cash."
She said that as well as Santander's rate cut, Lloyds Bank would also cut its Club Lloyds credit interest rate from 4% to 2% in January and TSB would reduce a 5% rate on its Classic Plus account to 3% from January. And Halifax would drop its £5 monthly reward payment on its Reward current account to £3 in February.
Ms Springall said: "Clearly in the current environment these current account perks can not be sustained forever, which is why anyone sitting on the fence as to switch or not must work out if they would be better off by moving right now.
"Anyone with an account that is soon to change might want to revisit how they use their account and if the new changes will have a huge effect on them or not."
She pointed out that Nationwide Building Society was still offering an initial rate of 5% for 12 months on an account, while Tesco Bank had a deal paying 3%.
Andrew Hagger, founder of website Moneycomms, said : "It may well be that Nationwide Building Society sees a significant inflow of new customers - but only if it doesn't follow the market trend and maintains its current 5% in credit deal for year one."
He continued: "It's been a struggle to convince people to move banks and the reduction of benefits and credit interest could see activity levels stagnate as the difference between accounts narrows and the financial benefit is no longer a driver to look elsewhere for a more favourable deal."
Economic Secretary to the Treasury Simon Kirby said: "I'm delighted that more than 3.3 million switches have taken place and more banks than ever are providing this service to customers."