Whether you’re fleeing your bank’s bad customer service, or you want to pick up some easy money from a juicy cash incentive to switch to a different bank, a cashback scheme, or a better interest rate, there has never been a better time to switch current accounts.
Since the launch of the Current Account Switch Guarantee, which requires financial institutions to arrange the transfer of your bank account within seven working days, banks have become acutely aware that they could lose your custom at any time. As a result, tired old current accounts have been refreshed and revitalised with new features to encourage customers to join and to stay. You can now get free current accounts with a range of great freebies and facilities:
A cash or gift card incentive for switching (up to £200, but usually around £100-£150)
Interest on your account balance (you can get a high interest account that offers more interest than savings accounts)
Fee-free or cheaper overdraft charges
Cashback from selected retailers
No fees on European transactions (which is handy for travelling)
Offset mortgage facilities
And, if you’re willing to pay a small monthly fee, you can also gain access to a raft of other valuable benefits, including breakdown cover, travel insurance, mobile phone insurance, etc.
Bank accounts have traditionally been difficult and frustrating to switch, so banks provide incentives to attract new customers to do so. The switching process is not nearly as difficult as it used to be, so the incentives could be lucrative for comparatively little work.
Before you opt for a new bank with the slickest marketing or most attractive switch incentives, it’s worth assessing your situation with your current bank.
Look at how you use your existing bank account, and consider any changes on the horizon that might affect your financial behaviour by moving bank accounts.
For instance, if you regularly dip into your overdraft, and your financial situation is unlikely to change in the short term, then low overdraft fees should be high on your priority list when assessing alternatives. An account might have a large cash incentive for switching, but if the overdraft charges for the account are high, you’re likely to be worse off in the long run.
Equally, if you tend to maintain a healthy balance in your account, you should get an account that pays a high rate of interest. Be aware, though, that most current accounts will only pay interest on balances up to a specific cap. For example, if you had a balance of £15,000 in an account offering 3% interest on balances up to £2,000, you’d get £60 interest per year – but an account paying just 1% on balances up to £10,000 would net you £100 per year.
Armed with a good understanding of your requirements, it’s time to start researching your bank account options.
Using comparison tables is an easy way to compare your desired features quickly. They’re good for highlighting features that might otherwise escape your attention, and most will highlight any pitfalls that are usually hidden in the small print of financial products like bank accounts.
Once you’ve chosen an account, you’ll need to gather a few different pieces of documentation before you can apply. The exact list of documents will vary slightly from bank to bank so check before you submit to avoid delays to your application.
Proof of name/identity – usually this will require one document from this list: passport, driving licence (including provisional and EU/EEA), UK Armed Forces ID card, Young Scot card, Northern Ireland Voters Card.
Proof of address for the past three years – usually this will require a few documents from this list: UK driving licence licence (including provisional), bank statement from your current bank, utility bill, tenancy agreement, HMRC letter, council tax bill, etc.
Proof of income & employment details – usually this will require some evidence from your employer, such as a letter confirming your salary and company address. If you’re self employed, you might need to provide an invoice from a supplier or a letter from your accountant.
If you reside outside of the UK for tax purposes, you’ll also need a tax identification number (TIN) and your foreign tax residency details.
If you’re switching joint accounts, you’ll need everyone’s documentation – and everyone needs to agree to the switch.
Once you have all of the necessary paperwork, it’s time to apply for the new account via the current account switch service – and then sit back and watch the Current Account Switch Guarantee work its magic. The guarantee stipulates that the complete switchover cannot take more than seven working days, so your new bank will be working hard on your behalf to ensure it happens quickly.
First, you need to complete the application form for your preferred account using the information that you’ve diligently collected. The bank will then run a credit check and other verification procedures – and assuming they go through, you’ll be accepted for your new bank account.
Once accepted, you’ll need to fill in a separate Current Account Switch Agreement, which includes details of your old bank account (account number, sort code, and debit card number), and when you want the account switchover to occur. You can pick any working day that’s seven days or more into the future.
If you want to close your existing account, you’ll also need to complete an Account Closure Instruction form.
Once you’ve done the paperwork, your new bank will start to set up your new account and confirm your switching date.
You shouldn’t have to do anything after switching accounts. Your new bank will update your employer, the Department for Work and Pensions (DPW) for any benefits you receive, as well as organisations you have existing direct debits and standing orders with. You will also receive a flurry of letters in the post containing your account number, debit card, PIN and chequebook (if available).
You can use your old bank account until the day you switch, with one exception: you can’t set up any new direct debits or standing orders during the transition period.
Once your switch has been completed, you can start using your new account. Open up your new online banking website and see what you can and can’t do. Install your bank’s mobile banking app and try out the features and benefits available on your new account. And remember, if your new bank fails to meet your expectations, you’re only another seven-day switch away from another account. You can switch accounts as often as you like!