With so many competing banks offering different current account benefits, it never hurts to weigh up your options and think about making a switch.
This guide will fill you in on the potential benefits of switching your current account, and how the Current Account Switching Service can help make the process as painless as possible. Then, we will take you through the various different options available to you so that you can figure out the right account for you.
Why switch bank accounts?
Being unhappy with the bank you are currently using is generally a good enough reason to think about making a switch. You might be dissatisfied with the range of accounts they offer, fed up with their poor customer service, or just find banking with them inconvenient if you don’t have a branch local to you.
Like any business, banks are keen to attract new customers, and often provide incentives specifically for people who choose to switch to them from a competitor. These incentives can range from short-term rewards such as cash bonuses and vouchers, to longer-term benefits such as interest-free overdrafts and access to saving accounts paying competitive interest rates.
It’s worth noting that you’ll usually need to meet certain eligibility requirements to qualify for account perks and incentives. Most of the time, for example, you can’t have held an account with that bank previously, or at least not within a certain period. Most banks will also want you to deposit a certain amount each month as a customer, and may require that you set up a minimum number of standing orders or direct debits from your new account. They will also usually require you to switch using the Current Account Switch Service, which we explain below. This is all to reassure the bank that you are committed to using their service, and not just quickly opening a new account to reap the rewards. There may be other strings attached too, so it’s always worth being thorough in your research and reading the small print carefully before committing to moving.
Incentives will often be a cash switching bonus of around £100, or you may be offered free tickets or vouchers for certain shops and services. If you are thinking of leaving your current bank, don’t be blinded by these incentives; make sure you’ve read reviews on the bank’s customer service, and looked into its overdraft facilities and interest rates, as these will have more of a long-term impact on your finances than any one-off gift.
How do I switch my bank account?
If you’re certain you want to move to a different bank, then the Current Account Switch Service, or CASS, can handle the switch on your behalf. This service transfers your bank balance and all of your financial arrangements from your old account to your new one, and also makes sure your old account is closed down. This means that if you have any direct debits or standing orders in your old account, CASS will set them up in your new account and activate them on the date you’ve agreed with them.
This process typically takes just a week, and the service includes a guarantee that you will be refunded for any charges or additional interest if something goes wrong during the switching process.
What are the different kinds of bank accounts?
Standard current accounts
These are the most common accounts, typically set up for people’s daily banking needs. They are used for making withdrawals and deposits, receiving automatic payments like your salary or any benefits, or setting up direct debits to pay bills or for memberships.
Some banks may offer you an overdraft with your current account. An overdraft allows you to spend or withdraw more money than you have in your account at the time, on the assumption that you will pay it back. You may be charged a fee for making use of your overdraft, even if the amount you withdraw falls within an agreed limit, as it is still technically a loan from the bank. Therefore, you should aim to only use it on a short-term basis or in emergencies.
Packaged accounts are current accounts that come packaged with additional benefits for a small extra monthly fee. These can include:
- Car breakdown cover
- Certain types of insurance (eg. mobile phone or travel cover)
- Better rates on other products offered by the same bank
A packaged account can seem a tempting upgrade from a regular current account, but have a think about whether you’ll get your money’s worth from the benefits on offer. You might be better off opening a regular current account and searching for these benefits you need elsewhere.
If you have a low credit score, banks may not be willing to offer you a current account right away. If this is the case, you can still apply for a basic, “fee-free” account.
Basic accounts will allow you to make normal transactions such as paying bills and receiving payments, but they won’t offer you an overdraft. This is because an overdraft is technically a kind of loan, and banks are less keen to offer loans to someone with a low credit score.
Your bank may offer you a standard current account after you’ve had a basic bank account for a while and demonstrated that you can manage your money responsibly. You might be able to boost your chances of being accepted for a standard account by improving your credit score Read our article Seven steps that could improve your credit score to find out some of the ways you might be able to do this.
If you are thinking of enrolling in a university course then you should be eligible for a student account, usually with an interest-free overdraft. There is no age limit on these, so check if your bank offers you the option to switch to a student account if you are considering taking a course soon and feel as though you would benefit from the overdraft.
As the name implies, these are accounts you set up jointly with another person to manage your finances together. This would typically be a spouse, civil partner or long-term partner. Joint accounts are not a separate category from the other kinds; a current, basic or savings account can all be jointly-owned if you are both eligible.
When should I choose to switch bank accounts?
Even though many banks offer enticing perks for switching, and the Current Account Switch Service makes transferring straightforward, don’t rush into a move without being certain you’ve chosen the right account for your needs.
It’s wise to look beyond the short-term rewards offered and think about whether your current bank account works for you, or whether an alternative account offers better interest rates or overdraft policies. If it does, it might be time to seriously consider switching, as these things will affect your finances more in the long term.
Have you switched banks recently? Did incentives from your new bank prompt you to move? We’d be interested in hearing from you – you can leave a comment in the box below or join the money conversation on the Rest Less community.