Page last updated at 13:41 GMT, Wednesday, 16 July 2008 14:41 UK

Do we ever switch bank accounts?

By Kevin Peachey
Personal finance reporter, BBC News

Credit card
Changes to current accounts have made it easier to switch

Are we so in love with our bank that we would never consider leaving it for another?

Why do we stick with the same bank, while we change electricity suppliers quicker than a teenage boy swaps girlfriends?

An estimated 20% of energy customers changed their provider during 2007, according to regulator Ofgem.

But the Office of Fair Trading's (OFT) damning report into personal current accounts in the UK says that just 6% of bank customers switched accounts in the past 12 months.

The general view is that customer inertia is the main reason behind customers staying put - with some staying at the same bank where they opened their first account.

The OFT says 47% of those consumers asked in a survey had not even considered switching at all.

But it says for some there would be an immediate benefit in doing so.

Clarity call

The result of few consumers switching, according to the OFT, is that there is a lack of competition among the banks.

Consumers who persistently incur insufficient funds charges have potentially the most to benefit from switching their accounts
OFT report

"Without consumers willing to switch between competitors, banks have little incentive to provide better offers," the report says.

The implicit suggestion in the report is that the banks do not make it clear to people what any benefits would be if they did switch.

The complexity and lack of transparency in the fees that banks charge their customers mean the benefits of swapping to another bank are not obvious, even though, for the worst-off, they could be substantial.

Phil Jones, personal finance campaigner for consumer group Which?, says that switching should be made easier.

"It is a Catch-22 situation - people aren't switching because there is little difference between the big banks' current accounts and, because people aren't switching, banks have little incentive to compete for customers," he says.

Who wins?

David Black, a banking analyst at financial research group Defaqto, says that customers do not switch bank accounts like utility providers because "it is basically more of an effort".

People are worried that direct debit payments and standing orders will get muddled, even though banks had made it easier to change.

The British Bankers' Association says that switching is "easy" and, if customers stay in credit, it is fee-free.

"If customers want to switch banks the new bank will do all the work. This includes transferring the account and changing all the direct debits and standing orders," a spokesman says.

The industry body points to research saying people do not switch banks very often because they are happy with the products and services they receive.

But not all these views are shared by the OFT.

"Consumers have valid concerns about the switching process going wrong," the OFT's report says.

Some 28% of consumers who have switched reported some kind of problem, and 45% of those who have not switched were not confident of it going smoothly if they did.

David Black says that the people who chose to switch were generally either inspired by a bad experience with their current bank or they were people moving to internet-only accounts.

Other people likely to switch were those moving home who wanted to be closer to a more convenient branch.

But the OFT says that the big winners of switching would be those who were regularly hit by overdraft charges.

The watchdog implies that they are funding the rest of the current account market, such as the accounts of better-organised customers, while they could actually find accounts elsewhere that better suit their needs and charge them less.

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