Saturday, 7 July 2012

Itching to Switch Bank?

The Barclays LIBOR scandal is just about the last straw for British bank customers.

You don’t have to know what LIBOR is (the interest rate at which banks lend to each other); or whether the fact that banks, including Barclays, were trying to manipulate it meant you paid more or less for your mortgage to be furious that there seem to be no depths to which the banking fraternity will not stoop.

The rate-fiddle came hard on the heels of IT meltdown at RBS and NatWest that locked customers out of their accounts, halted payments and still hasn’t been fully resolved. Benighted customers of RBS subsidiary Ulster Bank have been told that they may have to wait until the end of the month until their accounts are in order.

As an aside, another RBS subsidiary the posh people’s bank Coutts, whose most famous customer is probably The Queen, was unaffected by the computer chaos, which probably tells you something about who gets looked after best in the financial services world while the rest of us fend for ourselves.

So in the wake of all this chaos, anyone in their right mind would want to switch banks or even get out of the banking system altogether, wouldn’t they?

Hey, not so fast. There are some great alternatives to the banks for savings and loans and everyone should check out the building societies and credit unions to see what’s on offer, particularly for loans, where dodgy brokers and payday lenders should definitely be given a wide berth.

But if you want easy access to your cash, direct debits, quick cheque clearance, or international services you can’t beat a bank account.

You can’t really avoid the banks anyway unless you have a current account with Nationwide, the world’s biggest building society. All the other UK building societies bank with a bank. Even the four that in addition to Nationwide offer their own current accounts clear their cheques and stash their cash with a high street clearer. The same goes for credit unions. You’ll get a different type of service from a credit union, but you won’t avoid your money being routed through a bank.
Even Think Banking, which offers paid-for accounts with budgeting assistance for those with credit problems, was hit by the RBS outage because it banks with it.

So what can you do if you are fed up with the big banks? The answer is to play them at their own game and don’t fall for their tricks.

With anything in financial services, the golden rule is to find a solution that suits you personally. Avoid the hard sell and the freebies and get an account that’s right for you. There’s really no point getting “£100 when you sigh up” if you have to pay £1,000 a month into the account to avoid punitive charges and you can’t do this. It’s a waste of time and money paying a monthly fee for an account that gives you “free” mobile phone insurance if you don’t have an expensive phone.

It’s simple really. Get the best rate you can on your savings; avoid rip-off loans and don’t pay charges if you don’t have to - including expensive pre-paid cards. This could mean putting your savings in a building society or borrowing from a credit union – or not, if you find a better alternative. It could also mean using a bank for your everyday financial transactions.

The reason is that bank accounts are a bit different from other savings and loan accounts and you can find yourself put to a lot of inconvenience if you don’t have one.

Remember that if you have problems getting an ordinary current account because of your income or credit history, just ask for a “basic bank account”. All the big banks offer them and they are absolutely free.

More information on the implications of switching: Why you shouldn't switch your bank account - and why you should.

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