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 7-day Current Account Switch Service, 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 is very easy. To get the ball rolling, you'll need to decide what type of bank account you are looking for, and then compare your options.
Once you’ve found the right account, you’ll need to fill in an application form with your new bank, providing some personal information and detailing your existing bank account that you want to switch from. You can usually do this online or you can choose to do it in a bank branch or over the phone if you prefer.
You will also need to provide documents such as proof of name and address, as well as proof of income and employment details. In addition, you’ll need to decide whether you want to do a full switch or a partial switch (where your old account remains open), and what date you want to switch on – which can be any working day that’s at least 7 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.
The Current Account Switch Service was introduced in 2013 to make it easier and simpler for consumers to switch bank accounts. It outlines how the switching process works and what rights you have if something goes wrong.
Under the Current Account Switch Service, your new bank will take care of switching over all your payments (including your salary, direct debits and standing orders) and your existing balance, while your old bank will close down your old account.
The service is backed by the Current Account Switch Guarantee which means your bank account should be switched over within 7 working days, known as the 7 day switch. This also guarantees that you will be refunded any charges or interest incurred on your old or new account as a result of a failure in the switching process - for example, if a standing order has not transferred successfully.
You can switch bank accounts as often as you wish to - there are no limits on the number of times you can move. Note, however, that if you have an overdraft, your new bank will need to approve your overdraft before you can switch. If you have a particularly large overdraft, you may be turned down.
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 suite 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 or case of wine. The best incentives today max out at just under £200, but £100 to £125 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.