Switching Savings Accounts
Switching Savings Accounts
Compare and shop around before switching your personal savings account
There is a significant proportion of consumers that believe it is too complex and risky to switch accounts, either due to switching rates are too low or uncompetitive alternatives. Banks have been concentrating on more visible fees, and not on the less visible elements such as insufficient funds charges and forgone interest. Insufficient funds charges, making it hard for consumers to control, or opt out of, an unarranged overdraft despite the fact that these make up the vast bulk of banks' revenues.
Check before you Switch Saving Accounts?
• Know how much you will effectively pay in fees
• Know what individual elements you are going to be charged for before or after they are incurred.
• Incentive for keeping your account in credit and Interest given
• Any charges and fees for insufficient funds and interest charged.
• Could you earn more interest from your current account or paying it in to a savings account or high interest account?
• Any charges for switching between suppliers, including early withdrawal and administrative charges.
• Timescale and down time when switching accounts,
• Incentives for switching savings accounts.
• Incentives and offers for keeping your savings accounts.
Banks see personal accounts as a gateway to selling other products. Personal accounts are used regularly by 90 per cent of consumers so naturally consumers often select additional financial products from a bank with whom they have an existing account with without the need to shopping around as it is an easy option and in most cases they think they are getting the best deal.
There is a downside for consumers taking up more than one service from their existing bank, Banks do prey on the more vulnerable consumers or will always offer you additional services such as credit cards or loans and are more than happy to supply you these if you have a good credit rating or have banked with them for a long period of time but if your circumstances change and your cash flow is altered that's when banks can be your enemy further more if you have all your eggs in one basket it can easy put you in the situation where charges start to build up.
Getting the Most of your Money
88 per cent of current accounts, which is around 47.6 million, receive an annual interest rate of less than 0.5 per cent. Banks earned over 85 per cent of their revenues on personal current accounts mainly from two sources, which are net interest income from credit and debit balances at around £4.6 billion and growing every year and levying charges associated with insufficient funds, which is over £2.6 billion.
This is due the fact that the most common bank account in the UK is the free-if-in-credit bank account. This type of account has a cost for consumers, which is not always apparent in the form of interest forgone. This is the interest that consumers could earning by holding their credit balances in a savings account or higher interest account rather than leaving them in a current account that generally pays no, or only minimal, interest on credit balances.
So how much are you losing well it's approximately £8.3 billion. Personal current accounts generate more revenue for banks than savings and credit cards combined: 31 per cent compared with 17 per cent on savings accounts and 13 per cent on credit cards.