04:25 31 July 2013
From September, the new Current Account Switch Service will come into effect, making it much easier and faster for customers to switch their current account.
As part of this, the Payments Council has announced the Current Account Switch Guarantee and Trustmark that will be used by participating financial institutions when the service launches. (Although the service is theoretically voluntary, 99.9% of all financial institutions have signed up.)
So how exactly will this affect you?
What is the Current Account Switch Service?
The Current Account Switch Service aims to make the process of switching current accounts much simpler and hassle-free. At the moment, the switching process can take between 18 and 30 days, but as of September, this will be reduced to a maximum of seven working days.
What is the Current Account Guarantee and Trustmark?
The new Guarantee and Trustmark, which underpin the service, are designed to give consumers trust and confidence when switching current accounts. All banks and building societies from this September will need to offer the following guarantee:
Although many of us regularly switch our insurance provider or our savings account, we're not so good at switching current accounts. Often this is because we believe the switching process is too complicated or something will go wrong and we'll end up losing money.
But it's hoped that the Current Account Switch Service will encourage more of us to get switching. Not only will the process become far quicker, but customers will also have the reassurance that if anything does go wrong during the switch, they won't be left out of pocket.
Kevin Mountford, head of banking at MoneySupermarket, said: "The Guarantee and Trustmark will help instil confidence in consumers that they can switch current accounts safely, securely, with the minimum of hassle, and provides reassurance and redress should things go wrong.
"Although in reality, switching is usually relatively straightforward, this move could be a real turning point in improving switching rates in the current account market."
But why bother going through the process of switching current accounts in the first place? Simply because there are a number of highly competitive current accounts on the market right now which could offer you far more than your existing account does. Some, for example, reward you for staying in the black, some won't penalise you for dipping into the red, and others are just renowned for providing top-notch customer service.
However, you don't have to wait until September to switch to one of these accounts. The switching process as it stands is still fairly straight forward, so it could pay to switch now rather than later.
We've highlighted some of the best current accounts below:
If you religiously stay in the black, the Nationwide FlexDirect Current Account pays an annual equivalent rate (AER) of 5.00% fixed for 12 months on balances up to £2,500. Bear in mind you must pay at least £1,000 into the account each month and after 12 months, the rate falls to 1.00%.
However, even if you dip into the red, this account could still suit you as it offers a 12-month fee-free overdraft.
Alternatively, the Santander 123 current account pays an AER of 1.00% on balances from £1,000, 2.00% on balances from £2,000 and 3.0% on balances between £3,000 and £20,000. In addition, you will earn cashback on some of your direct debits which leave the account. You will earn 1.00% cashback on your water bills, council tax bills and Santander mortgage payments, 2.00% on gas and electricity bills and 3.00% cashback on mobile phone, home phone, broadband and paid-for TV packages.
However, be aware there is a £2 monthly fee on the account and you must pay £500 or more into the account each month.
Another option is the Halifax Reward Current Account which rewards you with £5 every month you pay in £750 or more and pay out two or more direct debits. What's more, if you switch before July 7, you'll receive £100.
If you're a keen M&S shopper, you might prefer the M&S Premium Current Account which offers a £100 M&S gift card and 20% off your M&S shopping for a year. You will also earn M&S loyalty points with your debit card in M&S, a birthday gift worth £10 and vouchers to spend in store. But be aware the account costs £15 a month.
Finally, if poor customer service is your biggest bugbear, take a look at the First Direct 1st Account. The bank is renowned for its excellent customer service and you will receive £100 for switching to the account and a further £100 if you decide to leave the bank after six months. You'll also receive a £250 interest-free overdraft. You will need to pay at least £1,000 into the account each month or hold another First Direct product such as a mortgage or savings account.
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