Good alternatives to the high-street banks

With the recent RBS meltdown and the Barclays Libor scandal, high street banks are not our favourite institutions. But there are alternatives. And now's as good a time as any to switch, says Merryn Somerset Webb.

If you didn't fancy the high-street banks much last week, odds are you like them even less this week. The operational breakdown at RBS turned out to be just the beginning of the PR week from hell for the banking industry (see this week's MoneyWeek magazine cover story). Yet all this has already produced a silver lining: the British population, who until recently were more likely to get divorced than change their banks, have suddenly begun to get a grip.

A YouGov poll last week showed that 60% of us no longer trust the big banks (rather begging the question of who on earth the other 40% are) and Nationwide has seen a 26% rise in people switching their accounts to them. If you still bank with any of our big banks, you might like to think about joining those people.

That's partly because of the trust thing why would you keep your money in an institution you don't really trust to behave morally? But it's also to do with systems reliability. As David Bannister, editor of Banking Technology, points out in The Daily Telegraph, the big banks tend to have "legacy systems" designed in the days when bank branches were shut from mid-afternoon until the next morning, and the internet didn't exist. They weren't built to deal with today's transactions made 24 hours a day in real time. This was the core problem during the RBS meltdown: "as the IT people were trying to reset the original glitch, millions more were piling up behind".

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Go to a newer bank with more up-to-date systems and this might be less likely to happen. Nationwide gets great reviews from users (building societies, says The Sunday Times, are "increasingly investing in their systems") as does First Direct (which I suggested last week) and the Co-operative Bank. But if you're after a new launch, the most significant is Metro, which now has 12 branches in greater London and offers a full range of banking services. Sweden's Handelsbanken has over 100 branches in Britain you get a direct account manager and all decisions about your account are made in branch.

If you aren't keen to move current account you might think about shifting other parts of your finances from the high street: on Sunday Times numbers, less than 10% of the top deals on savings accounts come from the seven biggest banking brands. You'd be better off moving your savings accounts to Governor Money (where you can get 3.5% from the Clydesdale Bank); taking your personal loans from Derbyshire Building Society (typical rate 5.9% on £7,500); your insurance from Debenhams (£6.91 for a single trip to Europe) and your mortgages from Principality Building Society (a two-year fix will cost you 2.79% and a £1,000 fee).