Personal Finance: Switching isn't hard to do

Running a current account must be a highly schizophrenic business. On the one hand, surveys from consumer organisations show that on the whole we are deeply dissatisfied with the level of service we receive from banks. Yet when banks carry out similar surveys on their own customers, they achieve Stalin-like satisfaction ratings from respondents. Generally we tend to stay with the banks where we opened our first account.

So, for example, a recent Which? annual members' survey on current accounts found lower levels of customer satisfaction with the traditional "Big Four" banks - Barclays, Lloyds, NatWest and Midland - than with other banks. The main reasons for dissatisfaction were impersonal service, inadequate facilities, high charges and poor interest rates.

On the other hand, two thirds of Which? respondents continue to hold a current account with the Big Four. In fact, according to a separate survey by Abbey National, 47 per cent of adults, with 78 million current accounts in Britain believe "people are more likely to divorce than move their account to another bank".

While customers want good service, friendly staff, 24-hour telephone banking, a fee-free overdraft and interest paid while in credit, or so says the Abbey, not all of them receive it. In fact the Abbey National banking survey found that "72 per cent of customers surveyed have thought about moving their account, but it is the sheer inconvenience of switching accounts that stops 54 per cent of dissatisfied customers from moving. A further 27 per cent believe switching accounts to be pointless because they think that all banks are the same."

Is this right? Are all banks the same? What should we be looking for? And how easy is it to switch accounts? Brian Capon, of the British Bankers' Association says: "It is very important to match your needs with the service that banks provide. Before opening an account, jot down what services you want, go to a few banks and see what services they offer."

If location is not a problem, telephone banking seems to be the way forward for many. First Direct, part of the Midland Bank group, operates solely over the phone and recruits around 10,000 customers a month. According to the Which? survey, 84 per cent of First Direct customers are very satisfied with the service they receive. Lisa Kornofsky of First Direct says: "We offer a full range of banking products, from current and saving accounts to loans and mortgages."

Traditional high-street banks are also giving their customers the opportunity to bank over the phone. The Which? report says: "Telephone banking comes in two basic forms: automated and operator-based systems. Some banks use a combination of the two, with the automated system available around the clock and the operator-based system available during limited hours."

With the increase in telephone banking, the need to change your account when moving house (previously a common reason for customers switching accounts) is reduced. This may be one reason why people simply do not get around to changing their accounts to meet their changing needs.

"All banks offer free banking if in credit," continues Mr Capon, "but there are also added extras, such as a built-in overdraft." Midland is the first bank whose Meridian and Bank Account(s) both offer a "buffer zone" where no charges are made for the first pounds 50 overdrawn. Halifax offers a pounds 100 interest-free overdraft if customers' salaries are paid into their current account. But its rules appear complicated: "No charge is made to an account overdrawn without authorisation for less than two consecutive days within any month," says Halifax's spokeswoman.

Although Abbey National's current account has no such buffer zone, a spokesperson says: "We look at the history of how customers conduct their accounts. So in a one-off situation where someone may be only a few pounds overdrawn, we might waive the overdraft charge."

Some banks offer an enhanced service in addition to their standard current account - for a monthly fee. "For a monthly charge of pounds 5, Barclays Additions customers pay no fees or interest charges on overdrafts up to pounds 100, or on agreed overdrafts.

Customers also have automatic insurance against theft, loss and accidental damage on all goods worth over pounds 50 bought with their Barclays Connect card," says a Barclays spokesperson. "Customers receive discounts on private health- care and life assurance, plus access to a 24-hour legal advice helpline." Which? believes that: "Packaged accounts are worth considering only if you take regular advantage of the other benefits, not just the over- draft rate."

So now you've decided to join the 600,000 people who switched their account between July 1997 and July 1998. How are you going to go about it? Which? advises: "To avoid disruption plan ahead and switch gradually. First open your new account, wait until all your facilities are up and running before beginning to transfer your standing orders, direct debit and bill payments and make sure you transfer enough funds from your old account to cover them."

Abbey National offers an initial period of interest-free overdrafts to ensure that all standing orders and direct debits are paid on time. At Midland, a service guarantee is made to all new account customers: "We guarantee that their cheque book and debit card will reach them within five working days, their PIN within seven, that all standing orders will be correctly paid, and that we will waive all overdraft fees for the first two months," says a Midland spokesman. "We pay pounds 10 compensation for any mistake [we make]. The 2 per cent discount on personal loans between pounds 2,000 and pounds 15,000 means customers can bring their borrowing with them."

The Abbey National banking survey found that, despite worries that switching to a new bank would bring problems, 91 per cent of customers who did move found it easy.

It seems that if you choose the account that suits you best and check both your new and old accounts regularly throughout the transition period, you have nothing to lose.

HOW EASY is it to switch banks? Not that hard. This is how to do it:

l Once you have found a bank with an account that suits you, open it. Beware of simply seeking a new bank because you've exhausted the old one's patience: a credit reference check will be carried out.

l When you have opened the account, instruct your employer to pay your salary into it.

l Ascertain your direct debits - for electricity, gas, council tax etc. - and request new direct debit forms from each. Return them with new account details.

l If you won't have enough money in the new account for the first month's direct debit, agree a "buffer zone", allowing you an overdraft to meet that bill. Ask for it to be interest free.

l Instruct the new bank to set up any standing orders you need.

l Alternatively, send your old bank a form on which it must inform you of all your direct debits and standing orders. The problem with this approach is that it is only sent at the moment you are closing the old bank account, which may not leave you with much time to set up fresh direct debits from your new account.

l Close your old account, usually by sending in a tailor-made letter from your new bank. Simple.