Making the Most of the New 7-Day-Switch Scheme for Banking
The long running perception of the UK banking sector as an oligopolistic market- one which is dominated by the four largest banks- may be challenged by the new 7-Day-Switch scheme which should substantially reduce barriers to switching your current account. According to the Office of Fair Trading, Britain’s four top banks- Lloyds banking Group, Barclays, RBS and HSBC- control around 75% of the current account market and have thus been able to offer sub standard current account deals to customers due to a lack of competition.
The Government’s new 7-Day-switch scheme, which began on 16th September, does exactly what is says on the tin. Whereas customers have previously waited up to a month to switch bank accounts, under the new shake up of the banking sector, high-street banks have promised to switch current accounts within seven days. They will transfer across all payments into and out of customers’ accounts, thus reducing the perceived hassle of switching accounts.
How the scheme may benefit you:
With reduced barriers to switching your current accounts, it may be very sensible to start looking at some of the other offers around at present. A spokesperson from the Money Advice Service suggested it was “not uncommon to save £500 or £600 by switching your bank.” Summarised below are some of the best offers out there in the market at the moment:
Cashback and Package Deals
· Santander, 123 Account- One of the few accounts that offers interest on your money. It offers 1% on balances from £1000, 2% on balances from £2000, and 3% on those between £3000 and £20000. It also offers you cashback on household bills payable by direct debit (1% on water, council tax and mortgage payments; 2% on gas/electricity bills; and 3% on mobile phone and broadband). However, you will have to pay a £2 monthly fee and ensure a minimum monthly funding of £500 into the account.
· Nationwide, FlexAccount- A packaged deal offering you worldwide family travel insurance, mobile phone insurance, breakdown cover and warranty cover for your appliances. You also get 3% interest on balances up to £2500 and a 3 month free overdraft, although there is a monthly fee of £10.
· First Direct, 1st Account- Offers you £125 for switching plus a fee-free account provided you pay at least £1000 into the account each month. Further benefits include a fee-free overdraft up to £250 and excellent customer service (£100 cashback if you decide to leave within 6 months).
· Halifax, Reward Current Account- You get £100 cashback when you switch plus £5 a month reward, provided you pay in at least £750 per month and pay out at least 2 direct debits.
Business Current Accounts
If you run your own business it will also be of benefit to compare the market for the best business account deals. Some of the key features include fee-free banking, interest on balances that remain in credit, and overdraft facilities. Some recommended business accounts are outlined below:
· NatWest, Start-up Business account- Offers 2 years free banking with a £500 fee-free overdraft, provided your business is less than 12 months old with a turnover of less than £1 million.
· Lloyds TSB, StartUp Account- 18 months free banking as long as your account remains in credit. You can also get consultation support from a relationship manager.
· Santander, Business Start-Up Current Account- 12 months free banking and 0.25% interest on balances.
The key to finding the best deal for yourself is to ascertain exactly what benefits you most seek. If you often dip into your overdraft then it will be advantageous to look at accounts offering fee-free overdrafts. Alternatively, if you always remain in credit then you can start to shop around for higher interest rates and other perks from package deals. As a business owner you should also shop around to get the best deals and maximise the money you retain in your business.
Very few current account deals are offering interest at present and thus your money is losing value in this inflationary climate. Therefore, it is certainly worth assessing your options in order to maximise the benefits you can receive. Furthermore, as the new 7-Day-Switch scheme begins to take effect, banks should start to offer more attractive and innovative packages to entice customers away from competitors. It is therefore worth keeping a beady eye on new offers as they enter the market.
By Tom Hoadley at Tax Affinity Accountants. Tax Affinity based in Kingston upon Thames are expert accountants and tax advisers with client across the UK and abroad. For more information or a free initial consultation visit www.taxaffinity.com. Please feel free to comment and share this article with your friends. Follow us on twitter @Tax_Affinity for more money saving tips.
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