Switching current accounts: Your questions answered

Switching current accounts: Your questions answered

It's easier than ever before, only takes seven days and we're not doing it anymore. Obviously, we're talking about current account switching.

Since the Current Account Switching Service was launched four years ago, millions have taken the opportunity to move bank. However, the number of people making the switch has fallen to a record low.

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Just 57,779 changed current account provider last month, down from 120,774 in March 2016.

But what is the switching service, why should you switch and what can you get out of it?

What is the Current Account Switching Service?

In very simple terms, the Current Account Switching Service allows you to easily move current accounts without having to worry about Direct Debits, payments or being without a bank account for a period of time.

The whole thing can be completed in just seven days and all you have to do is apply for a current account at a new bank and choose a switching date – they do everything else.

The service covers 99% of UK current accounts, but does not apply to savings accounts, ISAs or non-UK accounts.

Why are people not switching?

It's hard to say. People are naturally cautious when it comes to anything involving their money, but the most obvious reason would be that people don't realise the benefits of switching.

What are the benefits?

There are huge benefits to be had which can save you money, make you some extra cash or just entitle you to an added perk.

What can I get out of it?

Most people have been with their bank for a long time. In fact, some research suggests we stay longer with our bank (17 years) than we do with our husband or wife (11 years). So, what can you get out of switching?

Pay less in charges

Do you often find yourself in your overdraft at the end of the month? If so you might be being charged for it, sometimes quite a lot.

By switching banks, you can end up paying a lot less in unplanned overdraft fees, or might even get an interest free overdraft limit.

Cash incentive

A lot of banks are offering new customers a reward just for switching to them and this can be up to £150!

Interest rates

Some of the best interest rates at the moment are being offered by current account providers and by switching you can take advantage of the best rates.

However, there are restrictions on getting the best rates, such as paying in a minimum amount each month or having a certain number of Direct Debits, so make sure you qualify before switching.

Money back

Some banks will give you cashback on Direct Debits paid from your account on the likes of Council Tax, energy bills and broadband. However, these accounts all come with a fee so make sure you'll earn enough cashback to justify it.

Local branches

There is a lot of talk about banks closing down branches, particularly in rural areas and city centres.

If you're affected by this, then why not simply switch to a bank with a branch near you.

Extras

From cinema tickets and magazine subscriptions to gift cards and discount insurance, banks are offering a range of perks to encourage you to switch.

While these might be attractive, it's probably not the best idea to base your decision around these. However, they could be good as a tie-breaker if you can't decide between a couple of options.

This article is provided by the Money Advice Service.

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10 things your bank doesn't want you to know
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10 things your bank doesn't want you to know
Once you have opened a current account with a bank or other lender, you will get a steady flow of emails, letters (and maybe phone calls) offering you a savings account, loan, mortgage, ISA etc to go with it. But while it may be tempting to have everything in one place, it's better to do the legwork and shop around for the best financial products. You can compare interest rates on loans and savings accounts in the 'best buy' tables in the newspapers, or look online on comparison sites. Remember you can still easily transfer your money between accounts, even if they are not with the same financial institution. 
Whether you want to apply for a new mortgage or refinance an existing one, your bank will probably be very happy to give you an instant quote in the hope that you will go with them. They may not tell you that you can shop around at other lenders. A mortgage broker can give you an overview of the best interest rates on offer, and might be able to cut you an even better deal him/herself. 

Want to cash in your jars of change that are sitting on your shelves at home? Many banks are not very keen on coins. They often only take it from their own customers. You will have to sort it into different denominations and put the coins in the bank's bags in set amounts (for example, £1 for coppers, £5 for silver, etc). Some banks only take a limited number of bags a day, or won't take any at busy times. Others take a different view: HSBC has free coin deposit machines in many larger branches where you pour your jar of coins into the machine and it counts them and automatically credits your account. Barclays, NatWest and RBS also have machines in large branches in city centres.

Bank employees now have a duty to point out that they only advise on the bank's products and don't offer independent financial advice. What they won't tell you is that even the advice they give you about the bank's own products should be treated cautiously. Bank staff are often undertrained, underpaid and overworked. (You could ask for the employee's qualifications before getting advice.) So do your own research and/or find an independent financial adviser.

Nothing is set in stone. Your bank won't tell you this, but sometimes it will waive a fee, for example an overdraft or an ATM fee, depending on the circumstances. You have nothing to lose by asking, if you can argue persuasively why they should waive the fee. Citizens Advice says your bank should treat you sympathetically if you can show financial hardship.

As stated in the previous slide, some things are negotiable – such as interest rates or waiving fees – if you can make a good case for it. In that instance, talking to an employee in person is better than filling in a form online.

If your account is overdrawn and you get paid, your bank could use this money to pay off your overdraft without your permission. However, you have a right to ask them not to do this so you can pay your rent or mortgage first. This is called first right of appropriation. You have to ask your bank in writing, and you'll need to write to them with new instructions every time money gets paid into your account. Make sure you write 'first right of appropriation' in your letter.

If money is mistakenly credited to your account, your bank or building society can recover the money, assuming they do this within a reasonable time. But you may be allowed to keep the money, for example if you didn't realise the bank had made a mistake and spent the money in good faith. You would have to prove that you spent it in such a way that it would be unfair to ask you to pay it back. You can complain to the Financial Ombudsman if you think your lender is being unfair in asking you to repay the money.


If you do have to pay it back, you could try to reach an agreement with your bank to pay it back in instalments without interest being added.

The Financial Ombudsman Service has more advice on what happens when payments have been credited to the wrong account. If you did something wrong - for example, by entering the wrong account number - rather than the bank, the Financial Ombudsman may still uphold your complaint. They consider whether the financial institution made it clear to the consumer that only the bank sort code and account number are used to process the payment, rather than the name of the payee. They will also ask whether the lender should have realised that the consumer had made mistake, and once the problem came to light, did the firm take reasonable steps to try to get the money back from the recipient.

If too much is deducted from your account, your lender may have to refund the full amount of the payment. For example, if the money is taken through a direct debit or credit card payment for a hotel room or car rental. When deciding whether the debit was reasonable, the bank or building society will take into account your previous spending pattern. But the bank doesn't have to refund the payment if you agreed the amount beforehand or were informed of the payment by your lender at least four weeks before.

If you don't have enough money in your account to cover a direct debit payment, your bank may not make the payment. It doesn't have to tell you that the payment hasn't been made, so the onus is on you to keep checking your account. If, on the other hand, the payment goes through, you may be charged for an unauthorised overdraft.

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