If you had to name the one thing you just couldn’t do without every single day, what would it be?
My instinctive answer to this is coffee. But that is, of course, the idiot’s answer. I can’t buy a coffee – or the ingredients to make one – without my debit card. The thing I really can’t do without is my current account.
Think about the reasons given to the public by politicians and senior bankers when the UK’s big banks were bailed out. They didn’t tell us that the wholesale funding markets were in collapse, that without a bail-out the nation’s bankers would have trouble with their mortgages or that capital ratios were a bit of a problem. No, they told us that without a bail-out the ATMs would stop working. Job done. That was the one thing that made everyone understand just how bad it would have been. No ATMs, no cash, no coffee, no lunch, no shopping at all.
But here’s the strange thing about us and our current accounts. We put up with them even when we aren’t happy with them. Research from Which? this year showed that about a quarter of customers have had some kind of problem with their account. Despite this, only a tiny number of people summon up the energy to move accounts every year.
That’s largely because we worry that our direct debits and standing orders won’t be transferred over properly; that payments will arrive at the wrong account and be rejected and that we will end incurring huge charges at one end or the other. This worry is the main reason why the big four banks (Lloyds, RBS, Barclays and HSBC) have maintained their extraordinary stranglehold on the market (they have 80% of it) for as long as they have. You might think that it isn’t particularly dignified for our four biggest banks to rely on our fears of their incompetence to make their money, but that’s pretty much the way the business works.
This may be about to change. Not only are people getting better at switching – the numbers have doubled since 2009, albeit from a pretty low base, but the banks have now been forced to spend £750m on a new IT system that guarantees you can switch in a week with no risk (until now this has been a three-week business).
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All your payments will move through one system; any money sent to the old account will be automatically swept into the new for 13 months (in the past banks have only been obliged to deal with outgoing payments in a move – not incoming payments); and in the unlikely event of any charges appearing, they will be cancelled.
The guarantees on this, says the Payments Council, who have confirmed that all this will happen within the month, will be “hard and fast”. In the past, something really bad has had to happen to make people move accounts – I was only shifted from my own inertia eight years ago when all my bank cards stopped working for the three-week period of my wedding and honeymoon. Not long now and it should only take something mildly irritating.
So where do you move to? You probably don’t want to make a final decision yet – the banks are bound to come up with some good new offers in the next few weeks. But the conventional answer is First Direct, and for once I see no reason to come over all contrarian about it. First Direct is owned by HSBC, but it behaves rather differently to most big banks.
You get a 24-hour UK-based call-centre where the phone is answered by a real person who – in my experience so far – is good at doing what you ask them to do. They pay as little interest as everyone else and their charges aren’t any lower in general, but the fact that they exude competence works for me. They are also currently offering mini bribes of £125 to new customers at the moment, which is nice.
I’m also a big fan of Swedish bank Handelsbanken. Switching to them isn’t quite as easy as switching to First Direct, as you actually have to go to a branch and be interviewed before you get an account. This sounds unusual, but it’s a deeply reassuring experience. That’s because you meet the person who will be your old-fashioned manager.
You tell her all about you and she tells you all about what she is going to give you and how she is going to make a living out of you in return. She is going to charge you a fee every month to have an account with her; she isn’t going to pay you any interest on your current account; she’s going to pay you a pathetic amount on your savings account; and she’s going to hope that you borrow a whole pile of money from her at some point in the future.
But as long as you are happy with that she will remember all your details, pick up the phone to you any time, make personal decisions on lending to you (the bank is very decentralised) and be very, very patient when your short attention span means it takes you two weeks to figure out how to use the online security system.
I emailed a few weeks ago asking her how much she would lend me to buy a flat in London (I think people appreciate these little jokes) and had a reply almost immediately. I liked that – it means that when the London crash finally comes (which it surely will not long after poor Mark Carney is forced to raise UK rates), I’ll know what I can buy in advance. That’s got to be worth £10 a month.
• This article was first published in the Financial Times.