Five things that might put you off switching current account
Since the launch of the Current Account Switch Service in 2013, more than five million current account transfers have been processed.
The switching guarantee means that your new bank or building society handles the switch process for you. It closes your old current account, moves your balance and switches payments within a seven working day window.
And in a bid to get more savers moving current accounts, a number of banks and building societies are offering cash incentives. For instance, HSBC is offering up to £200, Halifax £135 and First Direct is touting tech and travel vouchers worth around £200.
While the offers may be tempting, particularly as a cash boost before Christmas, there are some things to think about before switching:
1) Regular or linked saver accounts
Regular or linked savings accounts offer as much as 5% interest on your savings so are good inflation-beating products. But the big catch here is that you often have to open a current account with the same provider and adhere to strict criteria including a minimum monthly deposit amount and set up a number of direct debits or standing orders.
If you have a current account and a regular saver with the same provider and you are looking to switch to a new bank, only the current account will be closed and transferred. The regular saver will remain open.
For example, Santander 1|2|3 current account customers can earn 3% AER on up to £2,400 each year when they open the linked Regular eSaver.
Santander says that when a customer decides to close the 1|2|3 current account, they retain existing products linked to it, subject to the terms and conditions. But the rules state the account must be funded by standing order from the current account and once a switch has taken place, this is no longer possible. So they will no longer get the 3%.
It will remain open so people can access their funds, but if they want to close the regular saver account, they’ll have to go direct to the provider.
Another point to check is whether the new bank offers a similar regular saver scheme.
2) Online shopping accounts
If you shop online, chances are many of you will have your payment details stored on websites so you don’t need to add debit card details each time you make a purchase.
While CASS guarantees all regular payments associated with the old account will be switched such as direct debits, standing orders and bill payments, it doesn’t include ‘continuous card payment authorities’ linked to a customer’s debit card. This could be a PayPal or Amazon account, for instance.
Bacs confirms the old account card would be cancelled once the switch completes so customers need to contact the respective companies to provide them with the new account card details.
3) Overdraft users
Be careful if you regularly dip into your overdraft because the fees and charges may be more with your new bank.
Dipping into or hovering in your overdraft doesn’t automatically exclude you from switching current account using the CASS guarantee. But it will take a bit more work.
This is because you need to agree any overdraft facilities you require with your new bank or building society. Otherwise the new bank may be able to provide a facility where you can pay off the existing overdraft. Bacs adds: “If you do not come to an agreement with your new bank you must make separate arrangements to repay your existing overdraft before you switch.”
4) Cooling off period
If you switch current account and you’re not happy with the new bank, you can cancel the switch up to seven working days before your switch date but you may not be able to halt the process during the transfer.
Instead, you need to wait for the switch to complete (usually within seven working days) and can then switch back to your old bank.
However, it’s important to note that you probably won’t switch back to the same account with any existing preferential deals or rates that you once enjoyed.
5) Fee-paying current accounts
If you pay for your current account, it may be possible to try and time the switch to avoid rolling over into a new payment period, by taking into consideration any delays to the transfer.
Around 99% of current account switches complete within the seven working day window as part of the guarantee, but if the switch is delayed, then be prepared to cover the cost of the old account.
However, even if the switch is delayed, Bacs says if the new account is open and it has money in it, you can still use it.
If an error or mistake has been made which results in you receiving any charges or interest (say a direct debit hasn’t been transferred resulting in interest accruing on a credit card), Bacs says its guarantee ensures customers are refunded. But whether customers receive compensation above this refund amount is down to the individual bank to decide.