United Kingdom

Best UK current accounts: Starling and Virgin Money winning switching battle

The number of people swapping current accounts between April and June using the official service rose by almost a third on the previous three months, data shows.

After a slow start to the year, likely exacerbated by the lockdown and a lack of incentive to spend, people appear to once again be proactively looking for the best bank account deals.

NatWest and Santander were the big losers during the first three months of the year suffering net customer losses of over 10,000 each - individual bank data lags three months behind the overall data. 

Lockdown winner: Starling Bank managed to bag the most amount of switching customers.

Both banks have refrained from offering switchers sweeteners.

TSB also recorded heavy customer losses after cutting its once generous in-balance interest rate, according to the individual bank switching data.

Meanwhile Starling and Virgin Money were the two biggest winners from the data, securing switcher net gains of more than 17,000 each.

Virgin Money, which now includes Clydesdale and Yorkshire Bank brand switches, released its switching incentive in February, part of which was a 12 bottle case of wine worth £138 and this appears to have encouraged customers to join.

It has recently replaced its wine offer with a £150 Virgin Experience Days gift card allowing its customers to choose between thousands of experiences from spa days and short breaks to track days and sky diving.

Since the Current Account Switch Service launched in 2013, it has facilitated over 7.3 million account switches and successfully redirected more than 110.1 million payments.

Starling Bank, which doesn't offer incentives to switchers, instead relying on customer service and its app.

Andrew Hagger, personal finance expert at MoneyComms said: 'The individual bank figures are for the first quarter of 2021, so people will have made New Year's resolutions regarding their finances, and that may include seeking out a better banking deal.

'Virgin Money's case of wine incentive was something a little different from the standard cash handouts - it appears that this was a big hit looking at the latest switching data.

'Starling Bank continues to post impressive switching numbers without the need to offer incentives, it's been making stellar gains in the last three quarters, beating its rival neo bank Monzo by a considerable margin.

'Triodos Bank also posted an impressive net gain of 1113 - the interesting point to note is that unlike most banks, the number of accounts lost compared with accounts gained is very small - its ethically minded customers are obviously very loyal.' 

Current Account switching winners
Provider Net Gains
Starling Bank 17,769
Virgin Money 17,495 
Monzo Bank Limited 7,744 
Nationwide 1,474 
Bank of Scotland 1,448 
Triodos Bank 1,133 
Lloyds Bank 1,002 

A total of 182,745 switches took place between April and June, 44,769 more than the 137,976 switches recorded in the first three months of this year, although still just short of the 189,273 switches in the three months leading up to Christmas last year.

Current account switches dipped significantly in January and February with only 74,252 people swapping throughout the two months.

But since March the number of switches has remained relatively high and consistent as the gradual Covid-19 recovery plan and easing of restrictions unfolded.

Michelle Stevens, deputy editor of personal finance comparison site, Finder said: 'Consumers are starting to go out and spend again, and are looking for the best bank account deals and the best way to manage their money.

The top banks with the highest ratio of customer gains per loss were those that have an ethical focus suggesting switchers are beginning to look for their bank to align with their values.

'International travel is slowly starting to open up again, so people may be looking for accounts with cheap or fee-free spending overseas, such as Starling.'

The latest data from the Current Account Switch Service shows that the most cited reasons for favouring a new current account remain 'non-financial', as has been the case throughout the pandemic.

Between April and June, switchers favoured better online banking facilities, stronger customer service and the ease of mobile or app-based banking systems when selecting their new current account.

This is perhaps one reason why the likes of Starling and Monzo continue to perform strongly and steal customers away from the established banks.

Current Account switching losers
Provider Column
Santander -10,965
NatWest -10,605 
TSB -8,502 
RBS -7,621 
Barclays -3,533 
HSBC -2,851 
Halifax -1,637 

Since the beginning of 2018, Starling has gained 110,505 more customers than it has lost though the current account switching service, whilst Monzo has made a net gain of 131,290 during that same period of time.

'The digital-only banks are now regularly found towards the top of the switching leaderboard every quarter, and they're in a great position in that they can attract customers without paying out switching incentives,' said Stevens.

'The traditional banks tend to jump up and down the leaderboards based on the offers they have available and you can see the success of these switching incentives with Virgin Money's recent performance.'

Should you switch?

Over the course of the past year, from June 2020 to June 2021, a total of 646,569 switches were processed by the service.

Throughout the pandemic, the service has maintained a high switch completion rate, which continued in Q2 2021 with 99.8 per cent of switches completing successfully within seven working days.

Of those who completed a switch using the Current Account Switch Service seven in 10 say they prefer their new current account, with only two per cent stating that their new account was worse.

For those considering moving bank accounts - perhaps Tesco Bank current account customers who now need to find a new bank - although cash incentives can be a big draw, it is important to consider the other factors that make switching worthwhile.

Customer service, overdraft limits, interest rates, cashback, saving perks and other niche benefits such as cinema tickets are all factors that count for something.

Starling Bank, for example, is rated as the number one provider for service levels, according to the latest annual survey by the consumer group, Which?

For those looking for the best interest rates, Nationwide are offering 2 per cent interest on up to £1,500, albeit for the first year only - afterwards it drops to 0.25 per cent.

Lloyds is offering competitive rates with 0.6 per cent on up to £4,000 and 1.5 per cent between £4,000 and £5,000.

On top of its Experience Days gift card, Virgin Money also offer 2 per cent monthly interest on up to £1,000.

Santander offers 3 per cent cashback on selected household bills via its 123 account – although this is capped at £5 each month.

Like with Virgin, many current account providers offer additional little perks and lifestyle benefits, which might make them more appealing to some switchers.

For example, Club Lloyds and Club Lloyds Platinum accounts allow customers each year to choose from either six cinema tickets, an annual digital Gourmet Society membership, an annual magazine subscription or 12 digital movie rentals.

Overdraft is another key consideration for current account customers.

Customers switching to First Direct will benefit from their first £250 of any overdraft borrowing being interest free,

Another factor also to be wary of are account fees, which can be incurred in some cases.

For example, Halifax's Reward Current Account and Lloyds' Club Lloyds account both come with £3 monthly account charges whilst Santander charges £4 for its 123 Account.

Halifax and Lloyds waive the account fee as long as £1,500 is paid into the account each month, whilst Santander's 123 account cannot be waived.

'The only switching offer on "free" current accounts will be Virgin Money, who are continuing to offer a Virgin Experience voucher and 2.02 per cent interest on balances up to £1,000, said Stevens.

It comes as First Direct and HSBC pulled their cash carrot this week for switching. Stevens adds: 'Sometimes you don't know when the deal is going to end, so if it sounds good then try not to put it off for too long.'

Since the Current Account Switch Service launched in 2013, it has facilitated over 7.3 million account switches and successfully redirected more than 110.1 million payments.

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