Current account market 'lacks competitiveness'

12/02/2009

Brits are generally unwilling to switch their current accounts, experts have suggested.

The Office of Fair Trading (OFT) released a report recently, showing that 47 per cent of people had never considered changing to a new current account provider.

Just six per cent were found to have made the switch over the past 12 months.

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

Industry figures also confirmed the truth of these findings.

Speaking to the BBC, David Black at Defaqto, said that current account customers do not chop and change providers because "it is basically more of an effort" to do so.

Phil Jones, personal finance campaigner for consumer group Which?, added that regulations should be changed to encourage customers to switch if they want to.

"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 said.

EuroDebt director Kevin Still said: "We see a number of clients that have a number of credit accounts that are in arrears, like credit cards and loans, with the bank that they pay their salary or wages into or have their mortgage with.

"This can create problems where the bank has right of offset with regard to debts within the banking group. It is often the case that clients need to open a second bank account with another bank, probably a basic bank account, to minimise the risk of their earnings being swept out of their account before they pay other priority payments, like rent, council tax, key insurances and utility bills."

He added: "We have seen a rise in popularity of basic bank accounts and pre-paid cards with no credit facilities to help people in debt live within their means and not jeopardise critical payments."

Tags; Debt Management and Banking, Young Family Finances, Retirement Money Problems,

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