Cuts to rates and perks make customers switch

BANKING: Halifax among those to benefit from exodus

More current account customers have been ditching and switching their bank following a wave of providers cutting rates or reducing perks on their accounts.

Some 248,302 switches took place between January and March according to payments body Bacs, which oversees the current account switch service.

This was higher than the 208,387 switches that took place between October and December last year.

In total, more than 3.7 million current accounts have been switched since the seven-day service to make it easier for customers to ditch and switch was launched in September 2013.

Over the last 12 months, 949,047 switches were completed, which is down on the 1,061,144 in the previous 12 months.

But the figures show that current account switching has been creeping up this year so far.

Nearly 96,000 switches took place last month and around 90,000 switches were made in February, compared with just under 62,000 in January.

Several current account perks were made less generous by providers around the end of last year and the start of this year. In August last year, Santander announced a 3% rate on its flagship 123 current account would be halved to 1.5% from November 1 2016.

It said the changes were due to “the market expectation of interest rates staying lower for longer”.

Other cuts that have since come into place include Lloyds Bank cutting a rate from 4% to 2% and TSB reducing a rate from 5% to 3%. Halifax dropped its £5 monthly reward payment on its Reward current account to £3 in February.

Tesco Bank has bucked the downward trend by pledging to keep a 3% rate until April 1 2019, while Nationwide Building Society continues to offer a 5% rate.

Bacs said awareness levels of the current account switch service reached a new record high of 79% in March – representing an increase of 21 percentage points since its launch.

Figures from current account providers in Bacs’ report also show that Halifax made a net gain of more than 28,000 current accounts being switched to it between July and September 2016.