From a financial perspective, we are living in a funny old world. Equities have been rising year on year and property markets are going a bit crazy in some places (yes, I’m talking about you London). However, the craziest part of it all is that whilst you’ll currently do very well to find interest rates of instant access savings accounts above 1%, there are current accounts that offer up to 5% interest!
The stats show people don’t want to move
The banks are literally tripping over themselves for new customers to open current accounts, but consumers have historically not been all that forthcoming when changing their bank is concerned.
2013 research showed that consumers typically stay with the same back for over 17 years. When this is compared to the fact that the average marriage now lasts for less than 12 years, that’s certainly saying something.
Young people tend to bank where their parents did. I myself fall foul of this one. 3 in 5 young people (18-24 year olds) bank where their parents do.
But, why don’t we switch?
It used to be a hassle
It’s true – changing banks used to be a hassle. You had to change all your payments, speak to your HR department to get your salary changed, etc etc. Luckily, this is no longer the case. The Current Account Guarantee switch now makes all of this automated, and everything can be easily switched over in only 7 working days. There’s no longer any risk that you’ll not get your salary paid to the right account!!
Just check out the video below for some details on the program:
What other reasons are there for people not switching?
The incentive isn’t there?
This may have been true in the past. A bank is a bank, right? They all do the same thing. I might as well just stay where I am.
Well, this is no longer the case. With the banks clambering for your custom, you can get great deals in this low interest environment. Halifax, for example, are willing to give you £125 in cold hard cash for signing up to their current account and £5 a month from then onwards.
However, you should note that you don’t actually earn interest on that account other than this fixed amount.
What if you want to earn interest on your balance?
Instead, you may want to look at the TSB Plus Current Account, which offers 5% interest on balances up to £2,000 with no monthly fees. All they ask is for you to pay in a minimum of £500 per month (excluding internal transfers). If you can keep £2,000 in your account, that is £100 per year, or £8.33 a month.
Got more than £2,000 in your current account?
Then you might want to consider the Santander 123 current account, for example. Whilst the interest paid on credit balances is lower, at only 3%, this is paid for balances between £3,000 and £20,000.
You can also earn cashback on your monthly bills if you fund the account with £500 per month and have at least 2 direct debits set up.
Don’t forget about your ISA
When thinking about these accounts, remember not to overlook the impact of tax in your long term saving and whether an ISA product may be more appropriate.
Equally, think about what you are saving for. If your money is for the longer-term, over 5 years, you probably want to be thinking about investing for the long-term in higher yielding investments; maybe property or equities.
However, if you have cash for a short-term savings goal, or your everyday account that you use to receive and make transfer is paying you nothing back, then don’t be afraid to make the switch.