A “NEW era of competition and choice” for the UK’s 49 million current account holders dawns today, with a guarantee which enables consumers to ditch their old bank and switch to another provider in just seven days.
The pledge, which covers almost all of the current account market, aims to take the hassle out of switching current accounts and should ultimately mean providers offering better products and customer service.
When customers change accounts, their new bank will be held responsible for all existing payments being moved over with the account and any new payments accidentally made to the old one will automatically be captured by a central service and redirected for 13 months.
The length of time it takes to switch will be cut from up to 30 working days to seven, and interest and charges will be refunded if anything goes wrong.
The initiative is being overseen by the Payments Council, which said that around 49 million people in the UK hold current accounts.
A multi-million-pound advertising campaign and a guarantee trustmark has also been launched to raise awareness and boost consumer confidence.
Adrian Kamellard, chief executive of the Payments Council, said: “Today marks the beginning of a new era of competition and consumer choice in the current account market.
“We will watch with interest over the next few months to see the effects that come as a result of the new, simpler world of current account switching.”
Banks have already started ramping up competition in preparation for customers making the jump, while comparison websites have reported rising activity from those searching for current accounts.
First Direct recently increased its cash incentive to switch to £125, while Halifax is offering £100 and M&S Bank is handing out £100 worth of gift cards to new customers. Halifax also reported recently that it is on track to see 300,000 customers switch to it in 2013.
Citizens Advice chief executive Gillian Guy said customers have previously felt “trapped” in their bank accounts because the switching process was complicated.
She said: “Now is the time for banks to put their customers first by looking to see how they can save them money.”
Kevin Mountford, head of banking at comparison website MoneySupermarket, said the changes will reassure those who have previously been put off switching by fears that direct debits, salary payments and other transactions might go astray.
Caroline Rookes, chief executive of the government-backed Money Advice Service (MAS), described the launch as “a real boost”.
She said: “Having the wrong current account can cost you money. To avoid losing hundreds of pounds through charges or lost interest, it makes sense to check whether your account fits with how you use it and if not to switch as soon as possible.”
The MAS has developed a new online current account comparison table to help people shop around.
Which? executive director, Richard Lloyd, warned consumers not to let banks’ incentives be the sole basis for making the switch, because moving to the wrong account could be more expensive in the long run.
He said: “Banks should make it simple to compare current accounts so people can pick the one that’s right for them.”