9th September 2014
Customers are switching current accounts in order to try and earn interest on their positive bank balances while savings rates remain at rock bottom, new figures reveal.
Since the current account switching service launched last year cutting the time it takes to move banks, 27 per cent of those switching are doing so in order to get a higher in-credit interest rate, a study by MoneySuperMarket.com, the price comparison website has found.
Some current accounts are offering rates that are more than three times higher than easy access savings accounts, according to the website.
Nationwide and TSB have current accounts with in-credit interest rates of five per cent, while the leading easy access account pays just 1.5 per cent.
Nationwide’s FlexDirect account currently offers five per cent interest on balances up to £2,500, while TSB Classic Plus Account also offers the same rate on balances up to £2,000.
Santander’s 123 account pays 3 per cent on balances between £3,000 and £20,000 making it a good deal for those with higher savings.
A number of current accounts are offering incentives for customers who switch, such as a £125 M&S gift card for customers who join M&S Bank via MoneySuperMarket.com.
Customers who move their money to Halifax’s Reward Current Account receive a £5 per month reward and up to 15 per cent cashback when using their debit card as well as a £100 bonus to those who use its switching service.
The MoneySuperMarket.com study found 20 per cent of switchers want an account which offers cashback, 10 per cent are doing so in order to get better customer service or benefits, while eight per cent want a better overdraft deal.
Kevin Mountford, head of banking at MoneySuperMarket, says: “The implementation of the seven day Switching Guarantee last year certainly stoked the fire in the current account market, with many providers stepping up their offers to entice consumers to switch.
“For many savers, the return on your money will be much higher in a current account than a standard savings account, however, ISAs should still be the first port of call for savers due to the tax free benefits on offer.”
He adds: “In order to benefit from the higher rates, most current accounts require customers to meet a minimum funding amount, while many market leading savings deals have a number of account restrictions, so it is important to check this and other terms and conditions before you switch.”