Financial switchers must choose carefully

People are more reluctant to switch their financial products than they are in other walks of life

Emma Kennedy Personal Finance Correspondent

Shopping around to save a few quid on a heating bill or phone bill is becoming the norm for consumers, but switching is far less common when it comes to financial products.

According to Simon Moynihan, a switching expert with comparison website Bonkers.ie, the consumer appetite for switching financial products lags behind that for other products.

"For example, more than 40 per cent of consumers have switched either their gas or electricity bill at least once," he said. "There's a fairly vibrant energy switching market. In contrast, financial services tend to only be switched when people are forced."

Siobhan Howe, assistant director of public awareness and financial education at the National Consumer Agency (NCA) said that only about 4per cent of current account customers had switched provider.

According to Moynihan, DanskeBank's planned withdrawal from the current account market has pushed its customers into a forced switch.

However, he said consumers would also switch for value reasons, citing the interest in Permanent TSB's current account since other banks hiked fees.

"As long as there's a viable alternative to the status quo, people will switch," he said.

However, Moynihan said that switching on credit products was more complex than switching current account provider, as the consumer would be subject to an application process.

"The deals are there, but the question is, can you actually get them?" he said.

Figures from the NCA indicate that switching rates for credit cards, personal loans and mortgages are in single digits. "You have to apply for credit and meet strict criteria, so it's not simply a matter of deciding to switch," Howe said. "Also for something like a personal loan, there's a low level of appetite as it's typically a relatively short-term product."

Current accounts

All banks say they are happy to accept current account switchers, with various processes in place to make switching easier for consumers.

One bank that has made a big play for the retail market recently is KBC and it's continuing its bid to grow its market share with an upcoming campaign.

On Saturday, February 1, KBC is holding a "Change Your Bank day".

"[It's] a day dedicated for consumers to come in and compare their current offering with KBC's at a time that might suit them. The initiative is being run in light of consumers reassessing their personal finance arrangements early in the year and Danske customers researching alternative banking arrangements, " a spokesman for the bank said.

According to figures from Permanent TSB, its ongoing campaign to attract current account switchers has been a success.

"Through 2013, Permanent TSB opened 40,000 new current account customers. And since the start of this year over 2,000 customers are switching to Permanent TSB every week," the bank's spokeswoman said.

The bank's attraction for switchers is that it is the only bank that makes it relatively easy to escape fees for using your current account.

Other banks also cater for switchers. "AIB will provide customers with a dedicated member of staff to help them through this process. AIB also has a handy personal current account switching pack which can be found on our website," the bank's spokes-woman said.

Customers who want to switch to Bank of Ireland's current account can call a "dedicated switch line" to get a new account number over the phone.

"Then, when convenient, they can drop into the branch to provide the required identification to activate the account," the bank's spokeswoman said. "Alternatively, they can drop into the branch and open the account there with a customer adviser." Fifty eight Bank of Ireland branches will open until 8pm on selected dates this month and next to "make account opening more convenient", the bank's spokeswoman explained.

"Ulster Bank has a dedicated switching team which specialises in helping our customers switch to us and ensures the switching process is as smooth as possible," a spokesman for Ulster Bank said, adding that the switching team kept customers up-to-date on their switching progress with regular text messages.

Keep your account in credit, as an overdrawn account cannot be switched

To make the process of switching more efficient, banks recommend that customers follow a few simple steps.

"A preferred switching date should be picked by customers, we recommend choosing a time of low activity on their account," Ulster Bank's spokesman said.

"Keep your account in credit, as an overdrawn account cannot be switched," Bank of Ireland's spokes woman advised. "Remember to inform your employer of your new account details."


There was a time when banks were falling over themselves to attract mortgage switchers. Now, the market is a less heavily advertised one, with a limited pool of potential switchers. Those trapped by arrears or negative equity find themselves with far fewer options.

"You have to assume that, if banks are not actively marketing switcher products, then they must be hard to get," Moynihan said.

Howe also warned consumers to think carefully if considering a mort- gage switch. "Switching could mean losing a tracker rate for example, or you could face a fee for breaking a fixed rate mortgage." AIB no longer accepts mortgage switchers, having discontinued it in 2010. Other lenders will accept switchers subject to strict criteria.

Ulster Bank accepts mortgage switchers with a maximum loan to value of 80 per cent. "The minimum term of the mortgage is five years and the maximum term is 35 years, subject to serviceability after retirement age," the bank's spokesman said.

With Permanent TSB, mortgage switchers will be accepted up to a maximum LTV of 90 per cent. "The key criteria is that the borrower is creditworthy," the bank's spokeswoman Bank of Ireland's spokeswoman said the bank was open for mortgage switchers, subject to "normal lending criteria and new business rates".

KBC Bank Ireland recently introduced new business rates for switcher mortgage customers. A maximum LTV of 80 per cent applies, and a maximum term of 30 years.

Personal loans Bank of Ireland does not facilitate personal loan switching, but other banks do, subject to terms and conditions.

AIB's spokeswoman said that all applications for personal lending - - including switching loans from other banks - are assessed, based on "affordability and repayment capacity".

Ulster Bank said it would accept personal loan switchers on a "case by case basis". However, a spokesman for the bank said that, for switching to be a possibility, there must be no history of "servicing difficulties or stress with the existing borrowing".

Permanent TSB will consider applications from customers looking to switch their personal loan. A good pay record on existing loans is key, the bank's spokesman said.

For now KBC is not competing in the personal loan or credit card market, but when it does, it's likely to make a bid for market share, as it has in the current account and mortgage markets. "Credit cards and personal loans products will be offered by KBC Bank Ireland in the coming months as part of our commitment to our retail expansion in Ireland," the bank's spokesman said.

Credit cards

Switching to an alternative credit card provider can sometimes allow a consumer to clear their credit card debt quicker by availing of a lower interest rate.

With Bank of Ireland, as with all other banks, credit card switchers are subject to all the normal application criteria when seeking a credit card.

"There is no upper limit to the transfer amount - it is based on the application," the bank's spokeswoman said.

She added that two of the bank's credit card products had "payment plan options".

"Customers can nominate up to two transactions at a time over €500 to be paid off in 12 equal instalments at an annual percentage rate of 6.9 percent, "she said.

The options with AIB vary across its product range. Some products offer a balance transfer introductory rate of3.83 per cent for 12 months. "For the Click card, there is no balance transfer introductory rate, but customers can balance transfer to the annual rate for purchases which is 9.11 per cent," the bank's spokeswoman explained.

"There is no balance transfer rate for our Student Mastercard, but there is an introductory rate on purchases of 3.83 per cent." A balance transfer is an option with Ulster Bank. "The customer will only-pay 3.9 per cent [fixed] for the first 12months on any balance they transfer.

There is no balance transfer fee," the bank's spokesman said.

With Ulster Bank, the maximum balance that can be transferred typically can't be higher than 95 per cent of the approved credit limit.

Permanent TSB charges 0 per cent interest for six months on balance transfers. "The maximum credit limit a customer can apply for will vary from customer to customer as it will be dictated by the customer's ability to demonstrate repayment capacity for the credit limit applied," the bank's spokeswoman said.


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