Got FOBO? Channel it by switching your current account

Have you got FOBO? That’s Fear of a Better Option. Fickle millennials are now cancelling social plans when something better comes up, according to the author Patrick McGinnis. But it’s not always a bad thing – especially when applied to  your finances. Young people need to learn to be more selfish and disloyal when it comes to their banking – especially when switching your current account can earn you £175. Find out how to channel FOBO into your finances and get the best current account for your needs.

switching current account
Ditch your current account, not your best mate’s birthday party

Earlier this week, I spoke about how I broke up with my bank – we had trust issues. That meant I was up for switching my current account. So who would I pick?

You might expect that I’d go for a trendy new challenger bank that was impeccably woke, had a beautiful-looking card and made me feel smug when talking about my finances at parties.

Sorry to disappoint but there were only two considerations in my mind: service and reward. I want to know my bank is reliable – i.e. no IT f***-ups. Okay, maybe I’ll permit one but no more than that.

I also want to know the app works well and has neat features that make a real difference to me, such as the ability to freeze your card if you mislay it. So a few millennial ticks in my column there, I grant you.

But I also want some cash for my troubles. And this is where current accounts get interesting (yes, really!)

You can actually earn money just for switching current accounts. And we’re not talking just enough to get a round in, have your nails done in one of those dodgy salons or take an Uber with driver who may or may not be authorised.

We’re talking a decent amount of wallop. Up to £175, to be precise. That’s what HSBC is offering customers right now if they can put £1,750 a month into the account. That’s about £21,000 a year – not possible for all, but below the UK average salary and definitely achievable.

Let’s put that in context. You’d have to put a whopping £27,800 a year into an easy access account, paying a typical rate of 0.62%, to get the same bung. And that would be a very dumb-ass thing to do. Not only would inflation erode the value of your money, you’d be missing out on potentially better returns by investing your cash instead (though this is never guaranteed).

Other banks are getting in on the act. RBS/Natwest will pay you £150 if you can put £1500 into its online Select account. This offer ends on 29 November for RBS and 6th December for Natwest. Marks and Spencer Bank will give you a £100 gift card, plus another £80 or £120 after one year. First Direct is also offering £50, far lower than its previous deals, but then £100 if you leave (knowing full well that most won’t!) And many other banks are offering decent in-credit interest too.

Warm word-of-mouth – or cold hard cash?

It’s a notable contrast with newer banks like Monzo and Starling. These outfits are relying mostly on warm word-of-mouth – not cold hard cash – to get people through the (virtual) door. Only one of these players bucks the trend: Monese is offering up to £20 free cash when you open a new account with them. That’s £5 when you open an account and an extra £15 if you spend £500 on your card.

Otherwise, newer players are betting on their cult-like reputation among young people to help break the banking monopoly. Is that why traditional banks have resorted to making it rain?

The high street banks have certainly seen their image take a battering since the financial crash. And their service often leaves a LOT to be desired. Monzo tops the current Which? rankings for best bank, with HSBC languishing near the bottom of the table. Hmm. That doesn’t inspire much confidence in someone like me, thinking seriously of switching to HSBC for the cash.

But I decided, perhaps against my better judgement, to take the money instead of the hot coral card. I went for HSBC over Monzo and here’s why.

1. Take the money…and if need be, run

via GIPHY

Firstly, that £175 is going to make any service niggles a lot easier to swallow. Plus, I am prepared to take the risk that HSBC might let me down as much as TSB did, knowing that even if I was that unlucky, I can just as easily switch away from HSBC. The Current Account Switch Service guarantees a smooth switch so I shouldn’t have to worry about direct debits or invoices going awry. Trust me, HSBC has not got the gig for good. It’s very much on a trial period and if it doesn’t perform, I’m off.

2.  The big boys are catching up

Secondly, banks like HSBC are doing some catching up on the tech front. It has recently joined the likes of Monzo and Starling in allowing customers to block payments to betting firms to avoid impulsive gambling. That’s not an issue that affects me but I think it’s a sign that banks are fast replicating the services and features that have – until recently – marked challengers out as unique.

HSBC also allows you to freeze your card if you temporarily lose it, which is a big plus for me. Furthermore, it has recently launched a Balance After Bills feature in its Connected Money app. This shows customers how much they could have left in their account until payday once their bills have been deducted. More than 350,000 people have started using this tool in the space of just one month, more than a quarter of Monzo’s total customer base built up over 4 years. If the likes of HSBC can continue that kind of take-up for budgeting tools, and more will be launched in the new year, newer players should definitely start to feel nervous.

3. The fintech revolution *may* not be all it’s cracked up to be

switching current account
Illustration by Robert Hunter

Yes, people are experimenting with newer banks. They’re fintech curious, you might say. But are enough of them going all the way? The latest account switching data  suggests not. The numbers ditching and switching are are rising year-on-year, but the top three banks making gains are Nationwide, HSBC and NatWest. As top fintech guru Chris Skinner recently wrote on his blog:

Yes, people are moving accounts between traditional banks and yes, yes, yes, Monzo and Starling drop in at fourth and fifth places respectively, but the numbers are still low generally. Most people don’t change their bank account. Sure, 919,000 did last year … but that is a lot less than the 50 million who didn’t.

But I don’t think it’s just down to inertia. I think it’s because those newer banks just don’t offer enough to make people feel its all worthwhile. Yes, if you’re at first base with budgeting and would appreciate seeing your spending in real-time and neatly categorised, the newer apps have their appeal. But my experience with my mistress app (Starling, if you must know) hasn’t quite convinced me a full changeover would radically transform my life.

Not least because I’m starting to have my doubts about Starling. It does some strange things. Some VERY strange things. For example, there was the trip I made to the Palace cinema on 1 November in Broadstairs in Kent, where I’m based part-time, to see Official Secrets (excellent film, BTW).

Except it showed up on my Starling account as a visit to the Jack Roe cinema…in MACCLESFIELD.

WTF?

I know this kind of tech doesn’t get everything right. But to say that I visited a cinema nearly 200 miles away is just bizarre. At first I panicked, thinking a vagabond in Cheshire had hacked into my account or stolen my card for a few hours so they could go and see Joker. Then I had to wrack my brains (and check my diary) to remember what I was actually doing on that date and piece together the mystery. Fear then bemusement…not the kind of words you would normally associate with fintech services.

The app does invite you to improve the accuracy of its categories and merchants. But I’m having to correct a few of these mistakes, and that defeats the whole purpose of this uber-helpful, hyper-intuitive tech, no?

Hedge your bets – and your banks

I’m keeping a foot in both the HSBC AND Starling camps for the for-seeable future. Having a secondary account is, in any event, a really good idea. But it’s okay to have FOBO about your finances. Switching your current account is usually the right thing to do – even if it’s just for the money. In this instance, no-one will judge you!

What do you think? Have you switched accounts recently? If so, tell me on Twitter or leave a comment below…

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