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UK Best Current Accounts - The End of ‘Free’ Banking?

Personal_Finance / UK Banking Sep 08, 2015 - 10:27 AM GMT

By: MoneyFacts


This month marks the two-year anniversary of the Current Account Switch Guarantee, and while many consumers have already taken advantage and switched providers, greater momentum could be caused by incoming changes to the retail banking market.

Last month the CMA reported that of the 17% of customers who start looking to switch their current account, a staggering 86% don’t go on to switch. It is also estimated that the annual rate of switching stands at just 3%, and worryingly, 25% of switchers move their account without researching the market first.* Meanwhile, frequent overdraft users were found to be the least likely group of consumers to move, due to the hurdles of securing an overdraft facility with their new bank and the complexities of comparing account charges (something that is increasing in importance as average authorised overdraft usage fees have crept up from £4.59 to £6.74 in just two years).

In a bid to boost competition and fuel switching, the Competition and Markets Authority (CMA) will be publishing its provisional findings and remedies on the retail banking market next month. It’s expected that the final report (to be released in April 2016) will propose changes that could have big repercussions for the current account market, triggering competition between banks and encouraging customers to switch. However, there are also concerns that this could lead to the end of ‘free’ banking…

Rachel Springall, finance expert at, said:

“Consumers are likely to be familiar with the Switch Service by now, but is it improving attitudes towards current accounts? The CMA highlighted that both types of customers - those who look at switching and those who subsequently move - expressed dissatisfaction with their bank, so it’s good that they are no longer putting up with their poor service.

“Rewarding switchers also seems to be the biggest trend in the market right now – Halifax, for example, is initially offering switchers £125 to move followed by an additional payment of £5 per month. Unsurprisingly, these rewarding monthly payments appear to have encouraged over 400,000 customers to switch to Halifax since the launch of the switching initiative.

“It therefore appears that the Switch Service has encouraged many people to vote with their feet, but there’s a chance that more consumers could be incentivised by plans to increase competition.

“These potential plans mean that the market overall is under increasing pressure to have a more level playing field, and while this is certainly good news for consumers, there could be a downside. Potential limits on the number of branches per provider and increased borrowing costs could mean that we begin to see an increase in the number of banks charging monthly usage fees. So, could we be heading towards the end of ‘free’ banking?”

Table attached showing current account averages and best deals on the market today.

*Sourced from the CMA retail banking market investigation report - Quantitative analysis of searching and switching in personal current accounts - 19 August 2015. - The Money Search Engine is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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