Savers urged to switch current accounts to get best returns
That's an appealing offer, considering that the best instant-access savings accounts on the market at the moment are only paying around 2.75%, which is why independent financial analyst Defaqto is urging savers to look to current accounts for the highest returns on their cash.
Defaqto's research reveals that only 6% of adults change their current account each year. For many people, the main reason they stick with an uncompetitive current account is that they are worried that switching will 'mess up' their direct debits, potentially leading to charges for missed bill payments, for example, or go awry in some other way.
However, David Black, banking specialist at Defaqto, is dismissive of concerns over the switching process, arguing that the huge majority of account moves go off without a hitch.He said: "Don't be afraid of the switching process because it is actually relatively seamless. The banks will do most of the legwork by arranging the notification of the change of account details with all the direct debits and standing order originators. The entire switching process will typically take between two and four weeks."
What's more, the rewards for making the change are particularly attractive at the moment, with the introductory current account offers available from certain banks including some credit interest rates that easily surpass those available from traditional savings accounts.
In fact, even those prepared to lock their cash away for five years with the market-leading, five-year fixed-rate deal from Nationwide building society are only being offered 4.75% - that's 0.25 percentage points less than the Alliance & Leicester Premier Direct current account rate, which lasts for the first 12 months you hold the account.
The only stipulation made by the bank is that you pay at least £500 into the account every month to receive this interest rate. And super savvy consumers know that you transfer this cash in and out again within a day or two should you want to make the most of the offer by keeping a balance of £2,500 in your account.
Alliance & Leicester is not the only bank trying to entice people to switch their current accounts at the moment, though.
Banks value current account customers because, as the Defaqto figures suggest, they tend to be loyal. The amount of contact banks have with their current account customers also makes it easier for them to cross-sell their other products, such as mortgages and loans, which is why they are prepared to offer such tempting terms.
One of the other current accounts worth a look is the Halifax Reward account, which gives customers £5 a month net of basic rate tax as long as they pay in at least £1,000 each month.
There is also the Santander Preferred In-Credit account, which also pays 5% fixed for one year on balances of up to £2,500 and requires a minimum of £1,000 to be paid in every month.
According to Black, switchers should also keep an eye out for special offer current account "golden handshakes" that could be as much as £100.
He added: "Consumers should look at their current account and see if they can get a better deal elsewhere. There are some generous introductory deals available which include high credit interest rates, 0% introductory overdraft rates and even in some cases a £100 cash gift."