Switching current account to a better deal or to a provider with better service can be daunting, especially as comparing different accounts can be complex. It's perhaps no wonder then that nearly 60% of personal customers have stayed with the same bank for over 10 years, but this lack of movement means that providers can be lazy with their offerings - and that's bad news for consumers.
In light of this, the Competition & Markets Authority (CMA) has led an investigation into the retail banking sector and come up with a series of proposals to boost competition and give greater protection to customers. Essentially, it aims to make account information clearer and easier to understand so that comparing different accounts is not so arduous. It also wants to improve the Current Account Switch Service and develop new online comparison tools.
Another key aim of the investigation was to find a way to give greater protection to those who use bank overdrafts. The report found that customers may be unaware when they go into an unauthorised overdraft or not realise the cost of doing so, so the CMA proposes that banks create an alert system that will help customers to avoid charges.
Being able to easily compare the various costs of overdrafts is also crucial, especially as research from Moneyfacts has found that these costs are increasing; for instance, the average monthly usage fee on authorised overdrafts has shot up from £4.61 two years ago to £6.88 today, while the average monthly usage fee on unauthorised overdrafts has risen from £43.88 two years ago to £55.69 today. However, with some accounts charging overdraft fees and others charging interest, comparing different accounts like-for-like can often be a headache.
"For too long, banks have been able to sit back and not work hard enough for their personal and small business customers," commented Alasdair Smith of the CMA's Retail Banking Investigation. "We believe the strong and innovative package of measures we are proposing will give customers the information and tools they really need to get a better deal out of the banks. They will also protect those who fall into overdraft from being stung with unexpected fees."
However, while these proposals certainly signal a move in the right direction for consumers, some have argued that the proposed changes could go further: "The sentiment behind the latest suggestions from the CMA is welcome but there still needs to be a stronger crackdown on excessive charges and a greater attempt to level the playing field for current accounts," said Rachel Springall of Moneyfacts. "Consumers may be shying away from switching their account due to the complexity of comparing deals or a lack of motivation, which are issues that will take a long time to rectify."
The proposals from the CMA are still just that - proposals. It may take some time for actual changes to filter in, but you don't have to wait to get yourself a better deal. Switching accounts can be worth the effort - according to calculations by the CMA, switching to a cheaper product could result in annual savings of £116 on average, so it's well worth taking the time to compare products and find the best fit for you.
Before you start looking, make sure you know what kind of account will suit you. If you never touch your overdraft, then a high interest current account may be a great idea, but if you find yourself regularly dipping into your overdraft, then a deal with low arranged overdraft fees and/or interest rates will be preferable. You can find out more about what to look for by reading our guides, and then once you're ready to start searching the market, check out our current account best buys.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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