Consumers are still being slow to switch current accounts, despite competition hotting up in light of the bank charges case, and providers such as Nationwide Building Society cutting the interest rates on their current accounts.
Nationwide is cutting its Cash Card current account rate by 2.72 per cent, from 2.8 per cent to just 0.1 per cent. The account is designed for people on low incomes, and this rate slash will do nothing to improve their financial situation as the credit crisis bites household budgets.
The new rate for the Cash Card account is now the same as NatWest, Barclays, RBS and HSBC, and this new cut follows several previous reductions this year from Nationwide in the interest rate on its FlexAccount.
The fees are what determine which bank a customer chooses, according to research from moneysupermarket.com, but Brits are still not using their power to switch in order to find themselves the best deal, with just 14 per cent opting to switch current accounts
in the last two years.
Of those who have switched, more than a third were driven to do so out of frustration over the fees they had to pay – highlighted by the court case on unfair bank charges
. Almost 30 per cent opted to switch in search of better service, and a quarter moved banks because they wanted a better rate of interest.
Six per cent said that they switched in order to be charged a lower rate of interest when they are overdrawn, and this minimal proportion might disappoint Barclays which had hoped to draw in customers by lowering this rate last week.
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.
"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."
In the arena of savings accounts
, Bradford & Bingley has launched a new 'rate for life' account and a Notice Saver which offers savers access to their money without loss of interest if they provide 30 days notice. It also rewards savers with higher interest the more they save.
"Whilst a rate for life will appeal to some savers who aren't inclined to shop around regularly for the best rates, it really does depend on what that rate is." Mr Mountford said of the new rate for life account."
Any fixed rate has to be eye-catching and in the current climate I do not feel that 5.25 per cent will be enough to attract many people's attention, especially if you are a basic-rate tax payer - the net return would only just keep up with inflation, which is the most important factor savers should be considering in this environment."
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