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Banking FAQs

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01/01/2006

I want to switch bank accounts. How easy is this?

It used to be a pain in the neck to switch UK current accounts, but things have become a lot easier now. The banks and building societies must follow strict guidelines and your old bank has three working days to pass relevant information to your new bank. With most banks you have to fill in two forms – an application form and a transfer form. Watch out for ‘incentives’ to switch UK current accounts however: some of them may be worthwhile (like free travel insurance), but you may have to pay a monthly charge for the account.

I went £5 overdrawn for the first time in 12 years and my bank charged me a fee. Is this right?

It’s not right in any meaningful sense of the term, but the bank is within its rights to charge you this fee, because somewhere in the paperwork you signed to get the UK current account you have agreed to these charges. Last year it is estimated that the big six banks made £4.5bn from these sorts of fees and, although the Unfair Terms in Consumer Contracts Relations Act (1999) states that penalties have to fairly reflect the cost of administering them, many banks will inflate this cost to the maximum limit.

I am interested in Internet banking. Do I have to open a special account for this?

Not usually, as most of the big banks now let you view and administer normal UK current accounts online. However, Internet banking UK is big business and with dedicated online banks like smile and Cahoot (part of the Co-operative Bank and Abbey respectively) becoming increasingly mainstream, it looks as if online banking is here to stay.

Is Internet banking completely secure?

How long is a piece of string? Let’s face it, there was ‘chequebook fraud’ and other scams in the pre-Internet days and criminals always keep up with the latest technology to ensure they continue to make money. The banks claim that their encryption (coding) is secure, but various incidents have proved it is possible to hack UK current accounts. Internet banking is probably as secure as any form of banking can be.

Can I guarantee free cash withdrawals with my bank account?

No, as free cash machines are not a specific part of the deal with any UK current accounts. At the end of the 1990s nearly all cashpoints were free, but these days fee-charging ATMs are increasingly found in petrol stations, convenience stores, pubs and post offices, with the typical charge being around £1.50. The trick is to use the ATMs outside banks and building societies, as these are generally free. But a UK current account with guaranteed free cash withdrawal? – not a hope.

My bank has closed its branch in the village where I live and it is now miles to the nearest one in town. Is it allowed to do this?

Unfortunately, yes, although you have asked a tricky question here. Lloyds TSB, for example, assured its customers some years ago that it would never close a branch where it was the last one left in a community. However, it has gone back on that assurance and many parts of the UK, especially in rural areas, have lost their bank branch altogether. Some people simply cannot get to the next nearest one and others do not like Internet banking UK. The banks’ response to your plight? Tough!

I have had my UK current account for years and it is a fairly traditional bank product. However, I believe some bank accounts now offer interest on balances. Is this true?

It certainly is, although you will not get rich on the interest paid on the average UK current account, which is usually measured in fractions of a percentage point. You might also find that Bank Rate increases are not applied to interest-earning products as quickly as they are to mortgages and loans.

Can I hold a UK current account with more than one bank?

There is absolutely no limit on the number of bank accounts you can hold, or indeed the number of banks you can hold them with. But people with a multitude of bank accounts often forget just how many they do have and, surprisingly for some, even how much money is in them. How do we know all this? Because a recent survey found that £2.8bn is sitting in ‘dormant’ accounts, with many account holders still alive and kicking but unaware of their good fortune.

Is a cheque with a cheque card number written on it a cast-iron guarantee of receiving the stated amount of money from the bank?

Far from it. Banks will ‘bounce’ (refuse to honour) cheques if there are insufficient funds in an account or something else is amiss. Just having the cheque card number does not automatically mean money will be paid over from a UK current account.

I have a serious complaint about the way my bank handled a recent problem. Is there anything I can do about it?

If the problem cannot be resolved by discussion between you and the bank, you should contact the Banking Code Standards Board (BCSBwww.bankingcode.org.uk) to see exactly what redress you have. The Banking Code, instituted in 1992, is voluntary, but the banks take it seriously. If there has been a breach of the Code in your case, the bank will be given four weeks to write to you with a final response, or explanation as to why they need longer to deal with the matter. A final response must be sent within eight weeks. They must also explain clearly how you can take your complaint further to the Financial Ombudsman Service if you are still unsatisfied.

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