Could switching bank accounts make you money?
1st Jan 2015 Managing your Money
If it’s been a while since you’ve switched bank accounts, or if you’ve stuck with the same old account since you were a teenager, then it could be time to consider moving. Here are the best deals out there.
Isn't switching accounts difficult?
Not only is the switching process simpler and quicker than it used to be, but competition between the high street banks means that you could be financially rewarded for leaving your old provider behind.
Misplaced loyalty
Most of us are rather loyal to our banks and a huge part of this is convenience.
It used to be the case that changing from one bank to another was time-consuming and fraught with annoyances, for example, direct debits going missing or payments failing to credit. So few people made the switch.
However, since September 2013 banks have been under an obligation to streamline the process under the “seven-day switching” rule, known as the Current Account Switch Guarantee. It should now just be a case of opening a new account and enabling the new bank to transfer all your details across, and that includes direct debits, salary payments, and all your other regular bills and outgoings.
Why switch?
Current accounts now have benefits such as cash back rewards, free insurance and even a cash bonus for new customers. Some deals—like the one from M&S Bank (scroll to the bottom to see more offers available)—offer sums of up to £220 a year to switchers.
Moneyfacts.co.uk, the money information website, says the latest offers can provide customers with more cash upfront than what they could earn in a whole year of saving with a standard savings account.
For example, the £150 gained when switching to Yorkshire Bank’s fee-free Current Account Direct could only be matched by a savings account paying an interest rate of 7.5% yearly on a £2,000 balance.
With the average no-notice savings account paying a paltry 1.41%, this incentive looks very attractive.
What are the deals?
M&S Bank is now offering up to £220 in M&S gift cards to current account switchers in their first year—that’s equivalent to an 11% interest rate (see the table below).
Yorkshire Bank will pay £150 in the first year to switchers, while First Direct is offering £125. HSBC is trying to entice new customers with an offer of £120. Halifax Reward is offering up to £175.
What to watch out for
It’s important to choose an account that is right for you, and not just be dazzled by the cash on offer.
Does the account provide facilities you need, like easy to use online banking? How do you pay money in? What happens if you go overdrawn – are the penalty fees likely to wipe out any gains or cash payments you might have enjoyed?
Think about how you use your account and what is right for you.
*Cashback on switching/spending per month
**Based on £2000
(a) Dependent on minimum funding of account.
(b) Account also offered by Clydesdale Bank.
(c) Cash received after monthly fee of £3 taken—more rewards available if certain Barclays products are held.
With the incentives for switching looking so attractive, it is worth the effort to switch – just as long as you are clear about the charges for borrowing and the terms and conditions for earning cashback.
