Brendan Burgess
Founder
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The UK Competition and Markets Authority has been reviewing free current accounts to see if they interfere with competition. After an 18 month study, they have concluded:
"The CMA provisionally decided not to recommend remedies aimed at ending free if-in-credit (FIIC) accounts as it saw no convincing evidence that the prevalence of the FIIC model distorted competition, noted that some banks have already devised accounts which compete with FIIC through the rewards they offer, and also noted that FIIC accounts give a reasonable deal to many customers."
I have attached the sections of the report dealing with PCAs ( personal current accounts. )
"(c) For many customers, PCAs are low-cost products, particularly for those
who remain in credit, and they perceive that there are few gains from
switching. However, our analysis indicates that customers can gain
financially from switching PCAs. By switching to the cheapest PCA
product, on average customers would save £70 a year, overdraft users
would save on average £140 a year and heavy overdraft users would
save on average £260 a year. The magnitude of these potential
switching gains suggest that many customers are not sufficiently aware
of available alternatives."
I pay around €80 a year in current account charges to AIB. I am very happy with my account and how the bank deals with me. I am not going to switch to another bank to save €80. If I have a significant service problem with AIB, I would certainly consider moving.
I think that UK consumers realise this. Why switch a bank where the relationship does matter to save so little?
"(c) only 3% of PCA customers had switched PCA accounts to a different
bank in the last year. Over the past three years only 8% switched, which
compares to switching levels of 13% in savings products and 31% in
energy over three years;"
That seems about right to me. There is very little to be saved by switching current accounts or deposit accounts, but a lot to be saved by switching energy providers.
"Heavy overdraft users would save £260 a year"
My income is volatile. I have a large overdraft facility with AIB. I use it from time to time e.g. I will probably use it on 12 November.
I have no idea what the AIB overdraft rate is. (OK - just checked - it's 11.85%). I might be able to get a lower overdraft rate elsewhere - I don't actually know. But I have a good relationship with my bank. They have extended the overdraft whenever I have needed it with very little fuss. If I switched to ptsb, I have no idea if they would be as flexible.
Brendan
"The CMA provisionally decided not to recommend remedies aimed at ending free if-in-credit (FIIC) accounts as it saw no convincing evidence that the prevalence of the FIIC model distorted competition, noted that some banks have already devised accounts which compete with FIIC through the rewards they offer, and also noted that FIIC accounts give a reasonable deal to many customers."
I have attached the sections of the report dealing with PCAs ( personal current accounts. )
"(c) For many customers, PCAs are low-cost products, particularly for those
who remain in credit, and they perceive that there are few gains from
switching. However, our analysis indicates that customers can gain
financially from switching PCAs. By switching to the cheapest PCA
product, on average customers would save £70 a year, overdraft users
would save on average £140 a year and heavy overdraft users would
save on average £260 a year. The magnitude of these potential
switching gains suggest that many customers are not sufficiently aware
of available alternatives."
I pay around €80 a year in current account charges to AIB. I am very happy with my account and how the bank deals with me. I am not going to switch to another bank to save €80. If I have a significant service problem with AIB, I would certainly consider moving.
I think that UK consumers realise this. Why switch a bank where the relationship does matter to save so little?
"(c) only 3% of PCA customers had switched PCA accounts to a different
bank in the last year. Over the past three years only 8% switched, which
compares to switching levels of 13% in savings products and 31% in
energy over three years;"
That seems about right to me. There is very little to be saved by switching current accounts or deposit accounts, but a lot to be saved by switching energy providers.
"Heavy overdraft users would save £260 a year"
My income is volatile. I have a large overdraft facility with AIB. I use it from time to time e.g. I will probably use it on 12 November.
I have no idea what the AIB overdraft rate is. (OK - just checked - it's 11.85%). I might be able to get a lower overdraft rate elsewhere - I don't actually know. But I have a good relationship with my bank. They have extended the overdraft whenever I have needed it with very little fuss. If I switched to ptsb, I have no idea if they would be as flexible.
Brendan