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Switching Current Accounts

in Banking, Current Accounts

Most people stick with their bank account for long periods of time, even if they are unhappy with the service being offered. The reasons for this are numerous; perhaps they believe that changing banks is too complicated, or even that all banks are ultimately the same anyway. However, switching current accounts is, in actual fact, not as difficult as many people think and can have huge financial benefits – especially if your current account is no longer geared towards your own individual needs.

The first thing to realise is that banks are not all the same. For example, the ‘big four’ banks – Barclays, NatWest, HSBC and Lloyds TSB – may appeal because of name value, or because they have a branch in your local area, but they offer comparatively low interest rates. First Direct provide excellent telephone, internet and SMS banking services, but they are also the first UK bank to charge a fee for basic personal banking. Some banks offer better overdraft facilities. Others offer better customer service.

It is important that your bank account is the best-suited option for your own individual needs. Some smaller banks can offer interest rates of up to 5 percent, while the bigger banks typically offer interest at the tiny figures of 0.1 or 0.2 percent. It can therefore be beneficial to switch to a smaller bank.

If your current bank provider charges you a montly rate for your account, it is worthwhile to shop around and see if you can find an account which offers the same service for cheaper, or ideally, for free. If you go abroad a lot, it would be beneficial to find an account which offers free overseas withdrawals.

Furthermore, in the current climate, it is estimated that three out of five people spend the majority of their adult life in their overdraft. If this describes your financial situation, it may be worth switching current accounts to a bank which charges low charges on overdrafts.

Customers should try to keep the charges they face to an absolute minimum and there is no point in paying more than you need to for a bank to look after your money.

Essentially, your choice of account could well boil down to one question – are you in the red or the black? If you are living in your overdraft, seek out an account with the best overdraft rates. If you are fortunate enough to be living in the black, find an account which offers the highest interest rates.

As banks have an obligation to cooperate with each other, the switching process itself is a lot easier than many people realise. Once you have chosen the best current account for your own individual needs, you simply need to supply the new bank with your existing current account details and two forms of ID. One of these forms of ID should be photographic, such as a passport or driving license, while the other should supply the bank with proof of your address; a bank statement is ideal for this. From there, switching current accounts is as simple as filling out two forms and waiting for the switch to take place.

If you have Direct Debits or standing orders, it is advisable to keep some cash in your old account, at least initially. Your new bank should automatically switch these to your new current account, but occasionally there can be delays in this process.

The main drawback of switching current accounts is the effect it can have on your perceived financial stability when applying for loans or mortgages. The length of time you have had your current account can be one way to demonstrate such stability. If your credit rating is good, recent account switches will not have a major consequence, however, if your financial profile is less healthy, it may make a difference. For this reason, it may be advisable to keep your old account open if at all possible, even if it is virtually inactive.