Getting value for money is the priority for everyone as prices continue to rise. Yet people across Ireland are still ignoring the scope for significant personal savings in their outgoings. And it could be costing them thousands of hard-earned euro every year.
That was the message in last week’s report from the Economic and Social Research Institute (ESRI) on Irish consumers’ reluctance to shop around.
The issue is broad-based. Despite regular reminders that it pays to switch utility as soon as the contracted lock-in period is over – normally one year – recent figures from the energy regulator, the Commission for the Regulation of Utilities, found just one in seven electricity customers switched provider last year and a marginally better one in six gas customers.
This was at a time when the difference between the best and worst rate for electricity was €581 for the average user over the year and a slightly more modest €316 for gas.
Pick the wrong provider – or worse still, stick with the wrong provider – and you are simply throwing away money.
The good news was that switching rates had jumped 15 per cent but that is less impressive in the context of a war-induced price surge that you might expect would have alerted all consumers to the need for action to ensure they were on the best price plan available in the market.
It’s not just with utilities – such as electricity, gas, rubbish collection, phone, broadband and television – that an annual review is advised. The same is true of financial services, most particularly the insurance sector where every household will likely have a handful of policies in areas like home, car and health cover, mortgage protection and even travel insurance.
It is easy just to let renewals roll over; easy and all too often costly.
The ESRI report was focused particularly on banking. Our relationship with banks in Ireland is deeply dysfunctional. We trust them in a way we’d hardly even trust our doctor or, for those so disposed, their cleric.
And we remain steadfastly loyal to them even as customer service is degraded, with fewer branches and a persistent trend towards replacing personal interaction with machines. The notion of “building a relationship with the bank manager” is now no more than a historical quirk.
Any application you make for credit will be crunched by a soulless algorithm that cares nothing for the nuanced explanatory details of your credit history. You are, in any bank’s eyes, nothing more than a revenue-producing unit from which to derive maximum profit. Only in their soft-focus advertisements do banks profess empathy, understanding and a personal touch.
Yet, as the ESRI report found, about seven in 10 people don’t even bother shopping around for the service that most suits them when originally opening an account, taking out a loan or applying for a credit card. We are more likely to simply traipse into whatever institution our parents habitually used, or the one physically closest to our college or home without critical evaluation.
Even when buying a home, the biggest financial commitment most of us will make in our lives, close to half admit they did not even compare offers from different providers when looking for a mortgage.
And once in, we’re loathe to move.
In the past five years, the numbers switching bank accounts has ranged from just 6 per cent to 17 per cent – and that latter figure is presumably inflated by the decision of both Ulster Bank and KBC to leave the market.
And despite competition in the mortgage market between bank and non-bank lenders as well as with different fixed and variable rate products, and evidence that there are savings to be made, fewer than half of mortgage holders have not even considered switching – with the figures higher for credit cards and personal loans.
The reasons cited by those asked include confusion about how to compare competing offers even though there are several websites now available that will present most of the key numbers for you in easily comparable form.
Another concern raised was uncertainty about the process, the costs and benefits of switching, and the fear of making a mistake.
It is true that there have been issues dealing with the sheer numbers moving account with the departure of KBC and Ulster but that’s a short-term issue.
And when it comes to switching bank accounts there is a code of practice in place for which that Central Bank has published a guide that explains the process in generally very easy to understand terms.
If you are looking to move banks, the first move will generally be to open an account with the bank you intend to move to. This will require a series of pieces of identifying documentation which any bank will have to hand.
Once open, you can instruct the bank to manage the switching process by filling out an account transfer form.
This can be done online or in branch. It requires the usual personal details – name, address, phone number and email – your new bank details which you will have to hand after opening the account and details of the account from which you are moving, such as the bank name, bank identifier code and the Iban identifying your specific account.
The form will also seek your consent to the move and to both banks having access to the relevant personal information to successfully complete the process.
It really is as simple as that.
All banks are required to have a switching pack that clearly explains the process, the timelines involved and the documents you will be required to produce. Ask them for it before you start the process to familiarise yourself with it. Getting the pack does not commit you to any move in itself; you still need to trigger the process formally.
One complicating factor is to time the switching date for a period in the month when you have no automated payments coming into or out of your old account, such as direct debits, wage payments etc. If a payment falls due as the switching process is ongoing, it can easily be rejected, creating problems for you down the line.
The switching process is supposed to capture all regular payments but it is not always as successful as it should be – which is why you are always advised to compile a list of regular payments into and out of your account, not forgetting that barely remembered charity donation or the small stipend you send to a maiden aunt or whatever.
What it won’t capture anyway are direct debts organised with companies outside the State. Those you will need to inform yourself when advised to do so by the bank to avoid any confusion on payment after the switching date.
The other caution is to ensure that any line of credit you may have with your old bank – overdrafts and credit card limits for instance – will need to be negotiated with your new provider. These do not automatically transfer to your new provider and you should make sure you are happy with what the new bank is offering you before activating any switch.
This is particularly an issue for older people who may have generous overdraft and credit card limits with their current bank that were negotiated at the peak of their earning powers but who are now retired or close to it. New banks will be noticeably more cautious and wary of your future earning capacity when agreeing new limits.
Once the transfer is complete, you need to confirm with the new bank that all these regular payments have been successfully mirrored in your new bank for your own peace of mind.
Switching bank accounts is not as straightforward as switching your electricity supplier or car insurance provider. There is clearly scope to make it less stressful and more automated but if you’re not getting a good deal, or decent service from your current bank, it is a cost-free way of moving on.
You don’t even have to worry about the legal and valuation costs involved, for instance, in moving your mortgage. Not that that should put you off.
You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter, you can read it here. Also, to ensure you continue to receive On The Money, be sure to add the email address you receive the newsletter from to your safe senders list.
