How to switch current account
People are more likely to switch the football team they support than switch their current account, according to new research from the Co-operative Bank.
The bank found 31% of people would be prepared to support another team in this year's World Cup if their primary team gets knocked out, while only 29% of respondents would consider switching their current account this year.
Last year, only 6% of consumers switched their bank account, according to figures from the Office of Fair Trading. This inertia is despite a general dissatisfaction with banking services and a lack of trust in banks following the financial crisis.
Traditionally, the main reason identified for inaction has been that banks make it unnecessarily complicated to switch. This led the OFT to call for banks to improve the transparency of their switching processes.
Now many banks have a dedicated switching team and have been forced to speed up the process, which has led to higher satisfaction. According to BACS payment services, 81% of people who have switched or are attempting to switch in the last five years have been pleased with the overall process.
How to switch
If you’re thinking of switching current accounts, it’s important to look at how you manage your account. If you’re usually in credit then look for an account with a high in-credit interest rate, but if you’re regularly in the red then a low overdraft rate and high limit are more important.
Banks are obliged to co-operate to make the process smooth. Take two forms of ID, one with a photograph and the other with a proof of address such as a utility bill for example. After that, you need to fill in two forms: a new account application and a transfer form.
Once accepted by the new bank, in most cases it should take care of transferring your standing orders and direct debits. The whole transfer process can take up to a month so a good tip is to keep some money free in the old account in case of delays.
Some banks will inform your employer, but tell them yourself to be on the safe side. Once you're happy everything has been transferred over close your old account.
Some banks routinely offer cash incentives to lure in customers and these are worth looking at. At the moment, Santander is offering customers £100 to switch to its Preferred in-credit rate account for example. The account offers 5% in-credit interest rate.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Created in 1968, BACS is a not-for-profit industry body, owned by 16 of the leading banks and building societies in the UK and Europe. All direct debits, standing orders, credit card payments, personal loans and the vast majority of salary cheques are processed through BACS. In 2010, 5.7 billion UK payments with a total value of £4.06 trillion were processed through the system.