Is it time to switch bank accounts?

As incentives to switch bank accounts have almost completely disappeared, consumers may be happy to stay with their existing account, but those that do could be losing out financially as there are many benefits to switching bank accounts.

Here, we’ve taken a look at reasons why consumers should consider switching bank accounts.

At a time of financial and job insecurity, many consumers will be looking for ways to prepare their finances in case money becomes tight. For those who have credit cards, loans and/or an overdraft with the same bank, they may want to ensure that their current account is with a separate bank. This is because, although rare, if the person falls behind on debt payments and the current account is held in the same name and with the same bank, the bank can take money from the current account and use this to pay off some of the debt.

There are many reasons to open a joint account, for example, being in a long-term relationship or as an easier way of paying bills among housemates, but they also come at a risk. For example, one person on the joint account can withdraw all the funds within the account without the other account owner/s permission. As such, many joint account holders also have their own individual bank account to hold additional money separate. Those doing this should be aware that if debt is taken out on the joint account and repayments are missed, if the single account is held in one of the names on the joint account and with the same bank, money can be taken from the single account and used to repay some of the debt. Again, this is rare, but those looking to open a separate single account may prefer to do this with a separate bank to the joint account.

Earlier this year, many banks announced that they were making changes to their overdraft fees, which resulted in an increase in fees on the majority of authorised overdrafts. Although overdrafts should always only be used as an emergency short-term lending option and repaid as quickly as possible, consumers who think they will regularly use their overdraft should consider switching to a bank with a low overdraft fee. Alternatively, those who know they will only be dipping into their overdraft slightly could choose one with 0% interest for a certain amount, for example Barclays Bank’s Bank Account offers 0% interest on overdrafts of up to £15.

Ideally, overdrafts should be repaid before switching to a new bank account, but some banks may allow the overdraft to be transferred to the new account. This would need to be agreed with the bank before the switch takes place and credit checks are likely to be carried out before the new overdraft is agreed.

With savings rates remaining low, those who will be depositing a large sum of money into their current account may want to switch their account to a high interest account. Some accounts are currently offering rates as high as 2.02% AER. This type of account often comes with terms and conditions, so these should be understood before switching accounts.

Switching bank accounts is fairly easy and, as long as the bank being switched to is part of the Current Account Switch Service, the switch should be completed within seven days and the new bank will refund any charges or lost interest incurred should things go wrong. For more information about switching bank accounts, read our guide on how to switch current accounts. A full list of current accounts available at the moment can be found on our bank account comparison chart.