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Switch Smartly To Avoid Charges For Dipping Into The Red

21 September 2016

  • Two-fifths (40%) of current account switchers have incurred unexpected costs and charges through the use of their overdraft
  • Average switcher dips into their overdraft more than three times a year
  • However only a fifth (20%) of those who have switched account since the introduction of the Current Account Switch Service considered its overdraft when deciding to move

As the Current Account Switching Service (CASS) reached its third anniversary over the weekend, The Co-op Bank urges people looking to change their current account to consider what they need from their bank account and switch smartly to find the right account.

The advice comes as a new study from the bank reveals that an estimated two-in-five (40 per cent) overdraft holders, who have changed to a new provider since the introduction of CASS in 2013, have incurred unexpected costs and charges as a result of dipping into the red.

Despite a quarter (25 per cent) of current account switchers relying upon an overdraft to support their everyday financial planning and day-to-day spending (28 per cent), just one-in-five (20 per cent) of those who have moved to a new provider in the past three years considered this as part of their decision to switch. The average customer who has switched within this period is likely to have dipped into their overdraft at least three times a year, with more than one-in-ten (13 per cent) using it every month.   

Although switchers are using their overdrafts on a regular basis many of them have incurred unforeseen costs and charges over the past three years – possibly as a result of the complex fees attached to many accounts leading to consumers’ confusion.

Almost eight-in-ten (78 per cent) claim to understand the terms and conditions that come with their overdraft, however when asked about their awareness of specific costs and charges many were unsure what these entailed. A fifth (19 per cent) said they did not understand any of them - which could explain the number who have been hit by charges unexpectedly.


Common overdraft charges

Percentage of current account switchers within the past three years who are aware of and understand these charges

Unpaid charge


Debit interest


Annual service fee for formal arrangement


Informal charge


Charges cap






I don’t understand any of these



Matthew Carter, Products and Marketing Director at The Co-operative Bank, said: “The third anniversary of the Current Account Switching Service (CASS) has shown that over three million people have switched accounts. However, current account switchers need to weigh up the benefit of switching incentives and look more closely at how they use their bank accounts and what they need from a new account to ensure they’re getting the best fit for their circumstances.

“Those who use their overdrafts on a regular – sometimes monthly – basis need to take that  into consideration when deciding to switch. However, it’s hard for consumers to do this research as complex charging structures make it difficult to calculate exactly what costs will apply to them.  

“By reducing and simplifying a number of charges, and going beyond the industry proposed monthly cap by having a £60 quarterly cap, we have developed an overdraft for our customers which is designed to put them in control of their finances, ensuring they are not penalised for small mistakes. This was guided by research with our own customers, those of other banks, and consumer group Which? to ensure it addresses actual overdraft behaviour and fulfils customers’ needs. We are also the only Bank who continues to offers rewards to customers even if they go into the red.

“The Current Account Switch Service has made it easier than ever before for customers to switch to a new account, and encourage greater competition in the market. However, these figures show how important it is for them to weigh up the overall value of an account when deciding to move, alongside the incentives offered to switch. By considering all features of the account, including its overdraft, they will be better off in the long-term and avoid incurring unexpected charges.”

More than two-thirds (77 per cent) of those who have switched within the past three years would consider looking for a new provider again in the future. Factors that might influence their decision include a more lenient approach from their bank should they make small or silly mistakes on their overdraft; greater flexibility in the use of their overdraft such as with a ‘grace’ period with which to make a repayment or buffer (57 per cent), text alerts and other forms of communication to remind them when they are nearing their agreed limit (47 per cent) – and more support in managing their money in the first place (26 per cent).

Key features of The Co-operative Bank overdraft:

  • A clear, simple and transparent charging structure that makes borrowing cheaper for all of our customers
  • It is designed to put customers in control of their finances and not penalise customers for small mistakes or occasionally slipping into a debt position
  • £20 buffer zone and discretionary waiver
  • No unpaid item fees
  • Industry-leading quarterly cap of £60 on charges, as opposed to the industry norm of a monthly cap
  • Reduction in informal charge, lowering the overall cost of unauthorised borrowing.
  • Everyday Rewards customers can earn up to £5.50 per month on their account, even if they go into the red. Other providers remove reward benefits if customers go overdrawn.

-- ENDS --

Notes to editors:

Research of 2,000 UK adults carried online, 6-8 September 2016.

References to ‘switchers’ refers to those current account holders with an overdraft who have switched within the past three years.

About The Co-operative Bank

The Co-operative Bank plc provides a full range of banking products and services to around 4.4 million retail and SME (Small and Medium Sized Enterprises) customers.  The Bank is committed to values and ethics in line with the principles of the co-operative movement.

The Co-operative Bank is the only high street bank with a customer-led ethical policy which gives customers a say in how their money is used.  Launched in 1992, the Policy has been updated on five occasions, with new commitments added in January 2015 to cover how the Bank operates its business, products and services, workplace and culture, relationships with suppliers and other stakeholders and campaigning.

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