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How much could you gain by switching bank?

Despite strong competition between banks, six in ten adults have been with the same one for more than 10 years. With a new report proposing changes to get more people moving, we’ve taken a look at the benefits of switching.

Today’s review of bank accounts published by the Competitions and Markets Authority (CMA) shows just how much money you can either save or make by switching.

The report found those who never use an overdraft will on average gain between £89 and £115 a year by switching. Some of the benefits on offer include interest on account balances, cashback on bills and even cash bonuses for switching.

For those who go overdrawn, the savings made can be even bigger. The report shows an average of £153 a year can be saved – though that can be far higher the more often an overdraft is used.

Why people don’t switch?

Despite the new Current Account Switching Service (CASS) launching in 2013, there are still many people who don’t know about it and how it works.

Similarly, a large number of people are worried about what will happen to their money if they do switch, and choose instead to stick with what they know.

What the CMA report recommends

Though the final recommendations won’t be due until the autumn, the CMA suggest some big changes are need to give customers more confidence when switching bank.

Recommendations include a monthly maximum charge for unarranged overdrafts, alerts to help people know when they go overdrawn, and access to statements from old accounts.

Despite looking into other changes to increase competition, it won’t break up the big banks or get rid of “free” bank accounts.

The benefits of switching bank

It will take a while before these changes come into play, but that doesn’t mean you can’t make gains now by switching to a different bank account. Here are the things to look for in the different accounts – make sure you check the terms and conditions to ensure the new bank is right for you.

Lower overdraft fees

If you regularly dip into your overdraft, you can save by moving to a bank which either offers an interest-free overdraft, or lower fees for going overdrawn.

Higher rates of interest

Many current accounts now offer higher interest rates on savings than ISAs or savings accounts. The downside is the balance you can earn the interest on is generally capped – but it’s still often your best bet if you have between £2,000 and £4,000 tucked away.

Cashback on bills

Though the banks that offer this service charge a fee for the account, this is usually covered by cashback on your household bills such as Council Tax and your utilities.

Switching bonuses

Some banks will offer you up to £150 to move your banking to them, though these usually require completely closing your old account and setting up Direct Debits.

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