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Thinking of switching your current account?
Bank customers are notoriously reluctant to switch current accounts. For some it takes a massive systems failure to prompt them to move. For others, it may be a nightmare afternoon spent being passed around an overseas call centre.
If you’re thinking about making the move, the good news is that the whole switching process is much simpler than it used to be. Here’s what to do:
1. Tell your new bank you want to switch to them
Once you’ve chosen your new current account, tell your new bank that you want to switch and give them the details of your current bank and the current account number.
You’ll also have to fill in a couple of forms and provide two forms of ID.
Once you’ve done that, your new bank should manage the switching process for you and move all your direct debits over to your new account.
2. Tell your employer
Even though the process is much more automated than it used to be, you should still tell your employer that you’re moving current accounts.
After all, you want to be 100% sure that your pay cheque goes where you want it to go.
3. Check the banks have done it right
Your old bank should pass all your information to your new bank within three working days. Then all the payments should be moved over within a month. But it’s still worth checking that the whole transfer process has gone smoothly.
Your new bank may be willing to offer you a temporary overdraft if payments have been made from your new account but no salary has yet been paid in.
It’s also a good idea to leave your old account open for a few months just in case anything has been missed in the transfer process.
Choosing the right account
Of course, before you can make the switch, you need to choose a new current account. There are three main issues to consider when you choose a current account:
1. Customer service
Given what’s happened with NatWest, it’s now very obvious that customer service is a very important factor when it comes to current accounts. If customer service is important to you, your best bet is probably the first direct 1st Account.
That’s because first direct has won numerous customer service awards including the lovemoney.com personal finance awards.
2. Cash rewards
First direct’s other big plus point is that you’ll get a £100 bonus when you have had the account for at least three months. What’s more, first direct is so confident that you’ll like its customer service, it will pay you a further £100 if you close the account before a year is up.
The only drawback is that you’ll have to pay in at least £1,500 every month to get the reward and you’ll be hit by bank charges in the future if you fail to pay in that much.
Alternatively, you could open a Reward account with Halifax and you’ll get £5 a month as long as you pay in at least £1,000 a month into your account. There’s also a £100 bonus if you open the account before July 15th.
3. Interest on your current account
[SPOTLIGHT]Most current accounts pay miserly rates of interest or no interest at all. But the Santander 123 Current Account will pay up to 3% interest on credit balances.
If your balance is over £1,000, you’ll get a 1% interest, if it’s over £2,000, you’ll get 2%, and if it’s over £3,000, you’ll get 3%. Interest won’t be paid on any balances over £20,000.
The account also offers cashback on some bills. You’ll get 1% cashback on water and council tax bills, 2% on gas and electricity, and 3% on phone, broadband and pay-TV.
However, you will have to pay £500 a month into your account and more importantly, you’ll also have to pay a £2 monthly fee. No doubt that fee will put a lot of people off.
You could also earn interest if you add the 'Vantage' option to your Lloyds TSB or Bank of Scotland current account. You don't have to pay a fee for this, but you do have to actively ask your bank to give you the Vantage option. You also need to pay in at least £1000 a month and stay in credit.
If you do all of that, you'll earn 3% on balances between £3000 and £5000, 2% on balances between £1000 and £3000, and 1.5% on balances between £1 and £1000.
4. Overdrafts
If you’re someone who frequently goes into the red with your current account, you should also consider what kind of overdraft deal is on offer.
Look at what kind of interest rate you’d pay if you have an authorised overdraft and also what would happen if you went over your approved overdraft limit. You might also be charged fees when you go into the red. Read more about overdrafts in Lloyds TSB and Bank of Scotland revamp overdrafts
That said, the best approach is to try and avoid having an overdraft if that’s at all possible.
Switch! Switch! Switch!
The most important point is that it makes sense to switch if you can. If more people are prepared to switch current account, then the banks will have a bigger incentive to offer decent products to all their customers and provide decent customer service too.
More on current accounts:
