Is it Better to Stay Loyal to One Bank or Explore the Best Accounts?

Q. My partner has remained committed to a single high street bank for the majority of his adult life, maintaining all his accounts with them. He believes this simplifies our finances and is also the bank where we hold our joint account. In contrast, I prefer seeking the best offers and diversifying my accounts across different banks. I’m considering transferring our joint account to a different bank that provides attractive switching incentives. Can you help us determine the better financial strategy? – Hannah, London

Discussions about financial strategies are common between couples, and while I don’t intend to choose sides, it’s essential to weigh your options carefully.

Both approaches have distinct advantages and disadvantages. However, if maximizing your financial returns is a priority, relying solely on your high street bank for all your savings may not be the optimal strategy. While it might be more convenient to consolidate your accounts, missing potential earnings could be a significant downside.

Transitioning to a new bank can seem intimidating, especially after years of loyalty. Your partner may be concerned about the risk of missing payments if direct debits aren’t successfully transferred.

Fortunately, the Current Account Switch Service simplifies this process. This service can swiftly close your old account, transfer all direct debits and standing orders, and redirect incoming payments, including salaries, all within just seven working days.

While there isn’t a corresponding service for switching savings accounts, advancements in technology have made opening new savings accounts and relocating your funds much easier. By utilizing a reliable comparison website to track interest rates, you can find opportunities to enhance your savings.

The current base rate set by the Bank of England is 5 percent, yet many high street banks only offer minimal rates on easy-access accounts. For instance, Barclays’ Everyday Saver gives a mere 1.66 percent AER on the first £10,000, with plans to lower this to 1.51 percent soon. Balances exceeding £10,000 yield even less, at just 1.16 percent.

If you’re willing to explore options outside of the traditional banks, you could secure rates of up to 5 percent, particularly from lesser-known financial institutions. On a balance of £10,000, this could mean the difference between earning £166 versus £500 annually. This strategy does not expose you to additional risks, and the rewards can be considered as nearly effortless income in exchange for making a bit of effort.

High street banks may offer better rates on savings accounts for existing customers, yet these usually apply to limited balances and are often temporary. If you can access these rates, they can be beneficial, but ensure that any additional funds are moved to more competitive accounts.

Investing in fixed-rate bonds or ISAs can yield higher returns if you can afford to lock away some capital. Still, the rates from high street banks are typically lower than those provided by other financial providers.

My advice for savings is to regularly review your accounts and consider switching if your current interest rate is inadequate. It’s crucial for you and your partner to find a balance between convenience and financial benefit, working towards a mutual agreement that satisfies both perspectives. If you can demonstrate the tangible benefits of switching accounts, your partner may be more inclined to take the plunge.

Anna Bowes brings three decades of experience in financial services and co-founded Savings Champion in 2011.