How to switch current account
After a glitch saw customers of NatWest, RBS and Ulster Bank blocked from their accounts, we take a look at how you can move to a different provider and see what else is out there.
People are more likely to switch the football team they support than switch their current account, according to research from the Co-operative Bank.
The bank found 31% of people would be prepared to support another team if their primary team gets knocked out of an international tournament, while only 29% of respondents would consider switching their current account this year.
Recent Nationwide figures show 40% of people have never switched bank accounts, despite being able to move overdrafts and overdraft limits to your new bank and benefits on offer from other providers including interest-free overdraft buffers, £5 a month being credited to you for life, cashback on your bills, free travel insurance and up to £100 in cash up front being offered to people who move.
Some banks are even offering to give you £100 if you decide to leave again after switching to them, or cash if they don't manage to correctly transfer all your bills over within a few days.
But in 2009, 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, Halifax is offering customers £100 to switch to its Reward account for example. The account offers also pays you £5 a month, ever month.
First Direct also offers £100 for switching to them, another £100 if you leave within six months and a £250 interest-free overdraft buffer, while Nationwide offers free European travel insurance and Santander offers up to 3% cashback on bills and up to 3% interest on positive balances.
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.