Bank on an account switch to help you save money

On The Money is packed with practical tips to help Londoners cut the cost of everyday living without giving up the fun stuff in life. Every Tuesday in the Evening Standard

Annie Shaw

10 April 2012

The gap between the spending binge of Christmas and the end of the tax year in early April is a good time to review your finances - and your banking arrangements are no exception.

It is said that you are more likely to divorce your spouse than dump your bank, but with new rules on switching, ending an unsatisfactory relationship with your current account has never been easier.

And the new year has brought plenty of attractive offers to get your custom.

But hold your horses - the last thing you should do is switching because of a special offer.

Although a "free £100" to move your account may look like an offer you can't refuse, moving to an account that doesn't suit your needs could end up costing you far more than a few quid.

'If it ain't broke, don't fix it'
If you are happy with your bank, stay put. While loyalty doesn't pay as well as it might, having a track record can help when applying for an overdraft, loan or mortgage. You are also much more likely to be let off minor misdemeanours in the management of your account, such as an accidental overdraft, if you are a long-standing customer.

Nor should you abandon a long-term satisfactory arrangement on account of a "bribe" from a
bank with a poor reputation for customer service.

But If you are dissatisfied with your bank...
On the other hand, there is no reason to put up with a bank that does not value your custom, and treats you badly. Vote with your feet.

How to choose a new bank
If you are thinking of moving, then it does no harm at all to look at some of the generous inducements on offer.

HSBC will pay new customers opening Advance, Premier and standard accounts 6% interest on deposits up to £2500 as long as they pay in at least £500 a month and operate two direct debits. The offer only applies to new customers opening an account before the end of this month.

Halifax and Santander are each offering £100 cash to new customers. Halifax already pays £5 a month to in-credit customers, while Santander pays five per cent annual interest on credit balances.

First Direct is putting up an extremely generous £125 cashback to new customers exclusively through the Moneysupermarket comparison website. The current account also opens the door to an 8% regular saver account. The bank offers a "satisfaction guarantee", so if you are unhappy and want to switch to yet another bank after 12 months, First Direct will give you an additional £100 to move.

When you're looking for a new account, don't forget to include smaller fry in your search. Take a look at newcomer Metro Bank (only in the London area at present), and The Co-operative Bank. The latter also operates out of Britannia branches and will soon expand further via the branches of Lloyds TSB that it is buying.

Remember that building societies such as Nationwide, Coventry, Yorkshire (via its Norwich & Peterborough subsidiary), Leeds and Cumberland also offer current-account banking.

What to look for
The key thing you should be checking is how an account matches up with your pattern of use - such as availability of branches, how internet banking works, credit interest and charges.

For most people, the rate of credit interest will be almost irrelevant, as they will rarely have enough money in the account for long enough to make a substantial difference, and attractive rates - such as those offered by Santander - may be subject to a cap. Anyone who fails to remain in credit should be concentrating on the overdraft rate and how charges are structured.

Flat-rate charges tend to benefit those who are likely to go heavily into the red, but may impose a disproportionate levy on someone who goes a couple of pounds overdrawn for a day or two at a time. A percentage rate charge, however high, could work out better.

Check out other charges, such as fees for overseas transactions and money transmission, if these are facilities you would use regularly.

Where an account requires you to pay in a minimum amount each month, or requires a minimum credit balance, be sure you will be able to keep to these terms and take into your calculations what happens if you don't.

Banks may be keen for you to take out a "packaged account" offering you various perks and services in exchange for a monthly fee. If you are tempted, make sure you take advantage of the "freebies", such as complimentary travel or mobile phone insurance, and don't end up paying for something you never use.

Kevin Mountford, head of banking at MoneySupermarket.com, says: "Ultimately, people need different things from their current account.

Some are always in credit and will find that cash incentives are the best way to maximise returns, but others will need to consider various overdraft charging structures."

Finally, if you do want to switch, don't be afraid. Your new bank should take care of most of the process, including switching over all of your existing direct debits and standing orders. Your old bank has to give details of all your direct debits and standing orders along to your new bank with your credit history within three working days.

Your new bank then has 10 working days to open an account for you once your application has been approved.

You may have to sort out ingoing payments such as your salary, though. Make sure your new bank gives you a free overdraft facility until the switching process is complete, as it may take some time for your salary switch and direct debits to fall into step with each other.

You can find more details about how to switch your account on the Which? website.

which.co.uk/money/bank-accounts/guides/switching-your-bank-account/

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