Business

More than 600,000 people switch bank account using new service

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Media captionCurrent account holder Charlotte Brooks on why she switched banks

More than 600,000 people have changed their current account provider in the first six months of a scheme designed to make switching banks easier.

The 609,300 switches in the six months to the end of March marked an increase of 14% on the same period a year ago.

Two thirds of customers are now aware of the service, according to the Payments Council, which oversees it.

But, with 46 million current account holders in the UK, switching levels remain relatively low.

The Payments Council said the new, quicker service had taken the "fear factor" and "barriers" away from switching.

Under the new rules current account holders should be able to move their bank account to another provider within seven days. It had taken up to 30 days to switch previously.

'Hassle-free'

The switching guarantee also means the new bank or building society has to arrange for the transfer of all existing incoming and outgoing payments to the new account.

"By making the Current Account Switch Service quick, hassle-free and removing the fear factor, we've taken away the barriers customers told us they had when it came to switching," said Gary Hocking, managing director of the Payments Council.

"There's also been a noticeable surge of advertising activity from current account providers, big and small, suggesting that the new service is helping foster competition and choice for customers."

However, some have questioned the success of the new scheme.

Richard Lloyd, executive director of consumer group Which?, said: "Despite an increase in public awareness and confidence, switching levels are still low, suggesting that the new seven-day service is not the game-changer that can significantly increase competition in banking."

Tesco Bank and Virgin Money plan to launch current accounts this year, while existing providers have offered a range of incentives for customers to change or stick with their current bank, from interest on balances to one-off cash payments.

Some current accounts now offer three times the interest rate of some instant access savings accounts, according to price comparison website Moneysupermarket.

"Current accounts should also not be ignored when it comes to shopping around for the best rate - especially as providers are also offering cash incentives to those who switch," said Kevin Mountford, head of banking at the website.

"However, people should be aware of high overdraft charges on some of these accounts. Those who regularly dip into their overdraft will find a better deal elsewhere.

"In order to benefit from the higher rates, customers will need to meet the minimum funding requirements or other terms and conditions, so it is important to check these before you switch."

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