When it comes to banking in the UK, we are surprisingly loyal to our banks – we almost never switch. Maybe we love our banks, or don’t believe the grass is greener elsewhere? Or mayhaps we just think it’s too much hassle to switch: banks are all the same, right? Better the devil you know!
Whatever our reasons, and despite initiatives by the government and financial regulators to encourage switching, we are stubbornly steadfast when it comes to bank accounts. On the one hand, this means banks have little incentive to up their game, but it also means many of us are losing out on better service, cheaper overdrafts and even cold, hard cash in the form of switching incentives. Yes, British banks will pay you to switch to them!
Once upon a time the main reason for not switching was the stress of missed direct debits and standing orders. Today, though, with the seven-day current account switch guarantee, which guarantees a painless switch (or compensation if it goes wrong), there has never been a better time to switch bank accounts.
Switching your bank account has never been easier, but that doesn’t mean you should rush into it – your new account should benefit you financially, at least enhance your lifestyle in some way. It’s worth quickly considering the different types of current accounts available in the UK:
Basic accounts offer no-frills banking if you have a weak or poor credit history. They are not a good source of revenue for banks, so they tend not to promote them, and some require you to apply for other products before they will offer you a basic account. But hey, they’re free.
Current accounts are the mass-market product of UK banking, and you probably already have one. Current accounts offer increased functionality over basic accounts, plus potentially a small amount of rolling credit in the form of an overdraft.
Although they rarely offer additional benefits, as long as you’re in credit and meet any various requirements (usually a minimum number of direct debits or money paid in per month), these accounts are completely free.
Packaged current accounts are paid current accounts, which might not sound very attractive if you’re used to free banking. For a monthly fee (usually between £2 and £20 per month), packaged accounts offer a package of benefits. These vary from account to account, but often include insurance, cashback, and lifestyle perks that can save you hundreds of pounds over the year. The big question you need to answer before getting one of these accounts is whether you will use all of the benefits.
One of the biggest incentives for switching bank accounts is a big wad of cold hard cash, or sometimes a voucher for a specific store. The best incentives today max out at around £200, but £100 to £175 is more common.
Sometimes the cash incentive will come in two parts: one lump now, and then another chunk if you stick with the bank for a year. This is obviously an attempt by the bank to prevent you from switching again quickly, but it can mean you’re stuck with poor customer service while you wait for the balance of your switching incentive to arrive.
In the case of voucher incentives, you need to consider whether you’ll actually shop at that store – otherwise the voucher might not be worth much to you.
Switching your bank account is very easy, thanks to the seven-day switch guarantee. Simply apply for an account at a new bank, and as part of that process you will complete a form detailing your existing bank account that you want to switch from.
You’ll also need to decide whether you want to do a full or partial switch, and what date you want to switch on – which can be any working day that’s at least seven days away.
Having filled in the relevant paperwork, you can sit back and wait for your account to be transferred. You’ll have to open a few letters for your new debit card, PIN, and digital banking details, but that’s about it: all of your direct debits and standing orders will be automatically moved over.