Brits too loyal to their banks
New statistics show that the number of Britons changing their bank to get a better deal has fallen – despite the introduction of incentives for consumers to switch their current accounts. As inflation increases and interest stagnates, this presents new problems for savers and individuals trying to take control of their finances.
Loyalty doesn’t pay
Launched in 2013, the Current Account Switching Service (CASS) was designed to make it easier for consumers to change banks, as well as increasing the competition between different institutions' offerings. In addition to encouraging better deals from the banks, it also introduced cash incentives for moving to a new provider, with customers receiving up to £200.
However, figures from Bacs, which runs the CASS scheme, revealed that 1.05m people switched bank accounts in the last twelve months. That’s five percent fewer than the previous year, suggesting that many customers won’t even change banks for cash or more interest.
Counting the cost
With inflation at its highest level in three years, some savers could be losing out. Mark Rennison, Finance Director of building society Nationwide, has highlighted that the cost of living is already rising far beyond the interest rates on savings accounts.
His comments also underline that banks are finding it harder to offer savers attractive rates, which will make it less probable that consumers will force competitive changes by switching accounts.
Managing your money
Those who have both personal loans and money in the bank are doubly affected, as their savings interest falls below inflation while their debt accumulates interest. This means that, in some cases, it's better to overpay on loans.
That said, the same interest rates which are costing savers are keeping debt costs down at the moment. However, with pressure from both consumers and banks increasing, there is the possibility that rates will rise again in the future.
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