Switching Banks: Is it Worth it?
Changing banks is one of those things that seems like quite a lot of effort to do, but it can actually have great rewards, especially if you take advantage of specific bank switching offers.
If you’re wondering how to switch banks, how long does it take to do so, or you just want some more information about the possible downsides of switching banks, as well as the benefits that you can potentially enjoy from switching banks, check out our guide below.
Why do people switch banks?
There are numerous reasons why people might want to switch banks. As well as benefiting from better interest rates and more attractive introductory offers and rewards, there are several other benefits you can potentially enjoy when switching banks, such as:
- Higher interest rates on savings,
- Cashback rewards and incentives,
- Lower overdraft fees,
- Discounts and other types of rewards such as shopping vouchers, travelling bonuses and cinema tickets,
just to name a few.
How does switching bank accounts work?
The first step of switching your bank account is to shop around and compare deals from different bank account providers to see which one can offer you the best deal.
You can use comparison services to do this, such as MoneySuperMarket or Compare the Market, so you can compare different bank accounts and see exactly what they can offer you.
When you find the right account for you and you decide to switch, the Current Account Switch Service will help to complete your transfer within seven days. Essentially, your old bank talks to your new one and everything is seamlessly switched over without you having to worry about doing everything yourself.
The Switch Service guarantees that everything will be switched over within seven days, including all your incoming and outgoing payments.
Switching banks pros and cons
Just like with almost any kind of financial decision, there are naturally pros and cons of switching bank accounts, check them out below.
- More attractive interest rates
- Fewer fees and charges
- Lower overdraft fees
- Better rewards and incentives
- Better customer service
- Introductory offers that your current bank account doesn’t offer
Of course, while there are definitely several advantages of switching your current account, there are also a few negatives that you should be aware of before you make the final decision to swap your bank account over to another one.
- No guarantee that your new account will be better in the long-run
- Switching bank accounts numerous times can show that you’re not financially stable if you constantly switch to a different provider
- You will lose the benefits and rewards you will have built up with your current bank account
- Switching banks could have an impact on your other financial services such as loans or mortgage
How easy is it to change banks?
Once you’ve found the new bank account that you want to switch to, in theory, the switch itself should be pretty easy and seamless. Your new bank will liaise with your old one to make the switch as quickly and easily as possible.
One thing to note about changing banks is that some banks require you to have a minimum pay-in amount when you open a new account with them in order to benefit from the perks and rewards or to avoid paying a fee. Some banks may only require you to have a minimum of £100 paid into your account each month for example, whereas others may want you to have at least £1000 paid into your account every month.
When you switch banks, your new provider will also likely carry out a credit check on you to see how good your credit report is, so try to ensure that your credit score is in good shape before you apply.
What happens to your direct debits when switching current accounts?
Your new bank account provider will take care of switching everything over, from your wages coming in, to direct debits going out. If you have money still left in your old account, this will also be switched over to your new account on the day of the switch.
Which banks offer money for opening an account?
To incentivise you to open a new account with them, some banks offer cash rewards and benefits if you switch your current account to them. Some of the banks that offer money for opening an account include:
- First Direct
- Halifax Reward
- Virgin Money
How often can you switch bank accounts?
In theory, you can switch banks as often as you want in order to take advantage of new incentives and introductory offers that many banks offer.
The only problem with switching banks so often is that it can be a bit of a hassle if you’re continuously switching accounts as you have to ensure that all your finances are in order, you’ll have to research which banks are the best ones to switch to and it can be a bit time-consuming.
Does switching banks affect your credit rating?
While switching banks frequently can be a bit of a faff, you’ll be pleased to know that it shouldn’t have any negative effect on your credit rating.
Providing that your bank accounts are in good shape and you’re not in your overdraft, switching banks won’t negatively impact your credit rating. Having said that, it also won’t necessarily improve your credit score either, so if you’re thinking about switching bank accounts to try and improve your credit score, it probably isn’t the best option to choose to do so.
You might like: 12 ways to improve your credit score
Does having multiple current accounts affect your credit rating?
Furthermore, having multiple current accounts also won’t have any effect on your credit rating, providing that you’re not going into your overdraft in any of them.
The only time that your credit rating might be affected somewhat is if you open multiple lines of credit within a relatively short space of time, but there’s nothing wrong with having numerous bank accounts, despite what many people mistakenly think.