Banks Forced To Give Better Deals

Banks Could Be Forced To Give Better Deals.

An initial findings report by the Competition and Markets Authority (CMA) has found that banking groups are simply not doing enough to promote better awareness and competition for consumers.

Initial findings show that only 3% of clients switch their personal current account last year and only 16% even thought about it.  57% of consumers have been with their bank for over 10 years and 37% for over 20 years.

Whilst a much easier bank account switching service was introduced to years ago it was found that many people are still fearful of switching given our complex lives of standing orders, direct debits and our income being automatically credited.  The Current Account Switch Service (CASS) is an extremely efficient bank account switching service where most of the large banks are now participants and all of your automated direct debits even if they are yearly direct debits rather than monthly are automatically switched to your new bank account, they do it all for you normally within 7 to 14 days.

Given the complexity of banking charges when we write checks or if we go overdrawn or if we use other services, the CMA felt that banks were not doing enough to promote the option to consider alternative bank accounts.

The above figures are even worse for small businesses.  When starting a business many small business owners whilst considering their existing personal account provisions do tend to look for business bank accounts with an initial free banking periods but it was found that 90% of businesses still remain with their business bank account when charges start to apply.

Why is all this important?

Your bank makes money on your current account balance.  If a banking group is lending your money out to borrowers it can be making 2,3,4 or 5% on mortgage interest and even more on loans and credit card debt, yet in most cases you receive 0% interest on your current account balance.

In short, banks are clearly happy for you to remain with them and earn next to no interest whilst they are making money either on your balance by lending it out elsewhere or wrong the charges that they levy for overdraft and loans.  The CMA has said that banks must do more to promote your ability to easily transfer bank accounts at trigger points such as:

• closure of local branch
• charges for overdraft
• changes in terms and conditions

No longer will banks be able to simply keep you as a client, the CMA has suggested that they must actively promote your ability to easily transfer bank accounts and they have even suggested that a free comparison tool be launched by the government to help you easily compare bank accounts.  They are also proposing a bank account comparison service for small businesses.

This will promote competition.

In addition, the CMA has suggested that banks should allocate greater resources to promote public awareness and confidence in how easy it is for you to switch bank accounts.

Indirectly, what this means is banks really will be forced to offer consumers and businesses better deals!

Experience

Both ourselves and many clients have used the bank account switching service to great effect.  Please contact us to discuss switching your bank account to make sure that you save the CMA estimated £70 per year that the average current account user could save or where you have an overdraft with significant charges, you could save up to £260 per year (according to the CMA).