Switch accounts and save £70 (and banks could help you do it)

MILLIONS of us could save £70 a year simply by switching our current accounts – and the banks could be forced to help us do it.

The Competition and Markets Authority is expected to make firms spell out the hidden cost of free banking – thought to be £8billion a year.

This could come in the form of a monthly bill breaking down overdraft charges and any interest paid.

The statements could also include an estimate of the interest customers could have earned in a savings account.

Consumer campaigners last night said the move would finally ‘shatter the myth’ of free banking. But the CMA is expected to stop short of ordering banks to levy monthly charges for all current accounts. And it is not expected to use its powers to break up the biggest banks and force them to sell branches to increase competition.

It began its investigation 18 months ago over concerns that the dominance of the high street giants meant they did not have to compete to give a good deal. It is also looking at why so few people switch to a better account.

The watchdog is making provisional recommendations before a final decision next year.

The CMA’s reforms also include measures to force banks to effectively help their customers find deals with rival banks in some circumstances. They will have to improve price-comparison tools to make it easier for businesses and personal banking customers to compare their accounts with others on the market. The report states: ‘Banks do not work hard enough to compete... and must make it easier for customers to take charge of their accounts.’

It wants to see an upgrading to a Government-backed tool called Midata, which helps users to com- pare current account providers. The CMA is expected to say that such a change, allowing users to compare accounts at the touch of a button, could have ‘ a radical impact on consumer choice’.

Britain’s so-called Big Five banks – Barclays, HSBC, Lloyds, Royal Bank of Scotland and Santander – have 77 per cent of the current account market and 85 per cent of that for small and medium-sized businesses.

Most major banks offer at least one free current account with no obvious charges for withdrawals or transferring cash. But millions of people are hit with charges if they go into the red. Charges for overdrafts with high street banks can be more expensive than payday loans, with some customers charged £1 a day for being a few pence overdrawn.

Lloyds customers who breach their overdraft limit can be charged £10 up to eight times a month.

Even those in credit effectively pay for their accounts because they often receive no interest.

There are 65million active current accounts in the UK, and the TSB says charges and lost interest costs customers up to £8billion a year.

Richard Lloyd, of the consumer group Which?, said: ‘The CMA must go further than improving information and switching, by proposing changes that incentivise banks to better respond to the needs of their customers.’

But Martin Lewis, of Moneysavingexpert.com, said banks were providing better deals for those who stay in the black, with some paying interest on current accounts and offering incentives of up to £125 to new customers.

Sources said yesterday that the CMA’s report would say heavy overdraft users could save £260 a year by switching providers, while all customers could save £70.

‘Consumer choice’