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We've talked about the benefits of switching bank accounts many times before, but now data from the financial regulator shows just how much banks depend on you staying put. The FCA's latest update on its Strategic Review of Retail Banking Business Models reveals that 10% of a bank's customers are generating from a third to half of all current account profits.
This may be great news for banks, but will probably be less welcome to you, the consumer. It suggests those who stay with their bank account provider, despite having to pay high monthly fees or expensive overdraft charges, are losing a lot more of their hard-earned cash to the bank than those who keep switching to the newest offer.
Earlier this week, one of our finance experts pointed out that unarranged overdraft fees are decreasing, but there is still plenty of scope for further reductions. While challenger banks in particular are doing everything they can to attract new customers, a worrying number of consumers are sticking to their bank regardless of what it offers.
It's not only less competitive deals on current accounts that people seem to just accept either, as the FCA's data shows that many consumers don't look beyond their own bank when taking out other financial products. Specifically, they found that 52% of credit card owners have one with their current account provider, while 48% of those with a personal loan get it from their bank and 32% of mortgage customers don't seem to have looked beyond their banking provider either.
According to the regulator's statement, "Major banks have a captive audience of customers who do not switch and can be cross-sold other products. Together they have a large share of the [personal current account] market, currently over 80%, giving them considerable competitive advantages."
Andrew Baily, chief executive of the FCA, then went on to suggest "there is no such thing as free banking." A look at the current account charts shows that there are certainly bank accounts out there that don't charge you simply for banking with them, although there may still be charges if you go overdrawn.
While a completely free bank account may be a stretch, those who've never changed providers may want to look around to see what else is on offer. And remember that thanks to the Current Account Switch Service, you could be all set up with a new account in just seven days.
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