11:15 18 February 2013
Unhappy current account customers will be able to switch to a new bank within seven days, under a raft of new rules announced by the Chancellor, George Osborne today.
The plans, put forward by the Payments Council and set to take effect from September this year, are designed to make transferring funds and direct debit details between banks faster and easier.
For example, as well as the one-week switch, a 13-month automatic redirect on direct debits from your old account to your new one has been proposed. So if your new provider fails to change your details, the money will still be taken from your new account and you won't incur any penalties.
Better deals from September
The new ease of switching should encourage banks to 'up their game' and improve their offerings to customers, according to the Payments Council, as it will be far less hassle for consumers to shop around for better interest rates and deals.
Tesco Bank aims to cash in on the change by launching into the current account market in September - the same time as the new regime comes into force.
Marks & Spencer bank, Halifax and First Direct are already offering incentives for new customers to switch, while Santander's 123 current account offers cashback at 1%,2% and 3% on a range of direct debits leaving the account.
Market still complacent
Despite cash incentives and often better deals elsewhere, research says that 75% of us have never switched our day-to-day bank accounts. This is partly because, as it stands, the switching process takes between 18 and 30 days - and can take as long as six weeks.
Last week, the Office of Fair Trading criticised the current account market for being too complicated and not being sufficiently competitive to provide consumers with enough choice.
The Chancellor's planned reforms are part of a wider look at the market which will also force banks to separate their investment and retail arms, in a bid to stop banks putting savers' money at risk through investments.
You don't have to wait for the Chancellor's plans to kick in though if you are unhappy with your bank account now. You can compare what's on offer using MoneySupermarket's current accounts channel.
Your old bank and the new bank will sort out the switch between themselves; all you'll need to do is provide your existing bank details and two forms of identification (one with a photograph and the other with proof of your address) and sign a switching mandate, allowing your new bank to request all your account details from your existing bank.
You'll then get a letter listing all your direct debits and standing orders, and you can choose which you want transferring to the new account. You'll also be asked for your employer's details so that your salary is sent to your new account.
Most banks will set up an overdraft facility without penalty charges so that if you miss any direct debit payments during the switching process, you won't be left out of pocket.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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