Cost Of Living: Cash Bonuses Behind Record Number Of Bank Switches

A record number of people switched their custom to a different bank in the final three months of last year.

Cash incentives led thousands of people to move their current accounts, as they sought extra income to help pay bills and deal with rising prices.

Up to £200 was offered by some banks to switching customers.

A total of 376,107 accounts were moved between October and December - the highest since a seven-day switching service began in 2013.

However, that still only represented a fraction of the millions of current accounts being used by individuals, small businesses and charities in the UK. That suggests many less financially engaged customers - who could benefit the most from switching - may not have been involved.

The Current Account Switching Service (CASS) oversees the seven-day system, which sees details of direct debits and other regular payments automatically adopted by a moving customer's new bank.

Payments accidentally made to or requested from the old account are automatically redirected to the new account.

In 2016, the Competition and Markets Authority (CMA) found customers did not switch unless they had a problem with their bank, and most thought they had little to gain financially by moving.

Those financial gains improved last year, with a number of major banks offering cash incentives for switching just as the cost of living was soaring.

Rachel Springall, from the financial information service Moneyfacts, said: "The record-breaking quarter for current account switching came at a time when several banking brands were offering a free cash sweetener amid a cost-of-living crisis.

"Those customers who decided to switch accounts could well have done so for different reasons, whether that be due to a poor level of service or that their existing account was not working hard enough for them.

"On the flip side, those customers who were struggling financially may have seen a free cash incentive hard to ignore."

She said many people were also conscious of budgeting and maximising their income as finances were squeezed by rising bills and prices.

The figures, provided voluntarily by banks, show that switching customers using the scheme peaked in November when 157,376 accounts were moved - the highest ever monthly total. The quarterly total was also a record.

David Piper, head of payments operations at Pay.UK, the owner and operator of Cass, said: "It is encouraging to see the highest level of switches ever this quarter, demonstrating the continued relevance of the service to consumers and businesses across the UK."

Although fewer cash incentives are available now, they have not disappeared entirely.

The current account cash offers coincided with better rates being offered to savers, after a decade of poor returns for those putting money aside in savings accounts. However, the buying power of those savings pots has been diluted by sharply rising prices.

Separate data from CASS shows Santander, HSBC, Starling and Monzo had the highest net switching gains between July and September 2022, among switchers specifically using the CASS system.

It is possible to switch current account provider outside of the scheme, but these numbers are not collected centrally.