Switching current accounts has been a nice little earner for the past year, with a host of banks offering generous cash bonuses if you’re prepared to make a move. However, in recent months, most of these deals have been quietly withdrawn.
After Nationwide (NBS.L) axed its bonus in December, it left First Direct as the lone outlier, paying £175 for a switch.
A major part of the reason for this is that the market is expecting interest rates to fall. At the moment, they’re more confident of a drop than the economists at the Bank of England, and are factoring in cuts from as early as May – and several more as we go through the rest of the year.
In an environment of falling rates, customers are less valuable to banks, so they’re less willing to pay to get them on board.
Another issue is the introduction of Consumer Duty rules, which mean banks have to keep the best interests of their customers in mind. This has put pressure on them to offer slightly more reasonable savings rates. If this attracts more money, then they may not need to pay extra to attract your current account cash as well. Even if it doesn’t bring more savings in, banks have been forced to adjust their model to spend more of their profits on better savings deals, so they have less to reward current account switches with.
It’s a disappointing change in the market. The switching deals were a great financial boost at a time when so many people are spending down to their last penny every month.
They also persuaded 1.3 million people to switch in the past 12 months. Given the fact that we’re more likely to leave our partner than we are to leave our current account, this can only be a positive step.
Too many people are sitting tight, despite the fact that a lot of current accounts offer expensive overdrafts, no interest on balances, and disappointing customer service.
To make matters worse, when we’re with one of the high street giants, we become a captive audience, so we tend to use products from that bank — from savings accounts to credit cards and loans — even when there are far better deals available elsewhere.
A switching deal shouldn’t sway the balance, because the bonus is going to be scant consolation if you end up with a bank that lets you down. However, it’s a great reason to convince people it’s worth shopping around, and leaving the shackles of their current bank.
There is one solid deal left on the market, with First Direct offering £175 for a switch. To qualify for the money, you can’t have had a First Direct product before, or opened an HSBC (HSBA.L) current account since the start of 2020. You also need to pay in at least £1,000 within three months of opening the account. However, if you can meet the criteria, the money is yours.
If you’re concerned about the mechanics of switching, there’s good news. There are rules in place to make switching a piece of cake, so you just open an account with your new bank, let them know the old bank account details, and they’ll do all the hard work for you — including telling your employer so your pay goes into the right account. It will also automatically close your old current account.
And while this isn’t something you should ever rush into without checking whether it’s right for you, it might not be a good idea to drag your heels. With so many switching deals coming to an end, it’s not entirely clear how long this one will remain — or whether it will stay quite so generous now that so many other banks have withdrawn their bonuses.