Overdrafts 'stop' people from switching accounts
The Competition and Markets Authority (CMA) have found that people aren't looking around for better deals or looking to switch, even though a number of banks to accept customers who are overdrawn.
There aren't any regulations that prevent you from switching accounts if you have an overdraft, according to a spokesperson from the Payments Council. Of course, there are some banks that might turn you down or ask that you pay off your overdraft first, but some are actually willing to take on the debt.
A lot of banks will be happy to take your overdraft because, instead of having to pay you interest, they can charge you for being overdrawn. It really is that simple.
This is all part of the CMA's research into the competitiveness of UK banks, as consumers are really not keen on changing who they bank with, despite the change in rules which got rid of a 30 day switching period to a 7-day one. The figures show that only 3% of customers surveyed had actually bothered to change banks, with over half staying with the same bank for 10-or-more years.
The CMA said it hasn't reached any conclusions and will carry on looking at customer perceptions of switching, and whether having multiple products from the same bank makes it harder to move.