Brits fail to make the most of competitive current accounts

23 June 2008 / by Joy Tibbs
Many consumers choose to stick to their existing current account whether or not they are getting the best deal, despite new deals coming on the market, according to moneysupermarket.com, which could be reducing competitiveness within the sector.

Current accounts have been in the limelight since the Office of Fair Trading initiated a test case against 'unfair' bank charges. However, moneysupermarket.com believes UK consumers could do more to ensure they are taking advantage of the top deals.

It found that only one in seven Brits have switched current accounts in the last two years. Of the 14 per cent that did so, 34 per cent acted out of frustration over fees, 28 per cent wanted a higher standard of service, and 24 per cent were looking for a better interest rate on in-credit balances.

Kevin Mountford, head of current accounts at moneysupermarket.com, said: "Current account providers have been working hard to tempt consumers to change by offering ever enticing in-credit interest rates and new packaged options. However, our research shows that most people tend to stick with their current provider despite derisory in-credit rates and extortionate fees."

Mr Mountford suggested that changing accounts will show banks that high fees and poor service will not be accepted by consumers. He said: "To be blunt, banks will continue to try and get away with as much as they can until there is a real threat consumers will change providers if they don't get a better deal."

Defaqto has compared the ‘average' deal now available for current accounts with the ‘average' deal available last time the Bank of England base rate was also at five per cent, back in December 2006. The results were largely positive, showing that the market has become more competitive in the last 18 months.

It shows that, on a balance of £1,000, the average current account rate is now 1.94 per cent, 37.6 per cent higher that the 1.41 per cent average in December 2006. However, while the average unauthorised overdraft rate has fallen 13.8 per cent from 25.18 per cent to 22.13 per cent, the average authorised overdraft rate has risen 3.1 per cent from 12.12 per cent to 12.5 per cent.

Principal consultant of banking for Defaqto.com, David Black, said: "The current account market is very competitive at the moment and there are some good deals available as providers seek to attract new customers and retain existing ones. It has to be said, however, that we're facing an uncertain future as the row about unauthorised overdraft charges could herald significant changes for the customer.

"It has been apparent for some time that there is an eagerness on the part of the banks to market their paid-for added-value packaged current accounts and I expect their efforts on cross-selling these accounts to be amplified."

©Fair Investment Company Ltd