Ready to switch banks? Here's how to do it
There’s a huge bank account price war launched for 2016. Many new challenger banks are desperate to win your business, so much so they’re prepared to pay you to switch to them. So our Money Saving Expert Martin Lewis is here with the lowdown.
I get more complaints about banks than any other financial area. Yet last year only 2% of people bothered to switch. So switching is the perfect revenge.
Q. Surely the reason many people don’t switch is the hassle?
Martin’s A: It’s been over two years now that ‘seven-day switching’ has been in place, and that’s made the process easier. When you apply for a new bank account, assuming you’re accepted, three things happen within the seven working days:
All standing orders and direct debits are moved for you
Your old account is closed
All payments to your old account are auto-forwarded for three years
This process seems to have made things much easier – I did a poll of 100s of people on my Facebook page and 82% said they found it 'easy and hassle-free', while only 4% had experienced problems. So if people are telling you it was a hassle when they tried, ask them how long ago it was; it may well have been before seven-day switching.
Q. What are these new deals out there?
Martin’s A: Bank incentives come in many different types. Let’s start with the most straightforward: those that’ll pay you to switch. Here’s a rundown, but for full details and eligibility criteria, see Martin’s ‘Top Bank Accounts’guide.
- New. M&S Bank had given switchers a free £100 M&S gift card for a while. But now it’s saying if you deposit £1,000 a month in the account (so pay in your salary) it’ll also add an extra £10 to the gift card, so that’s £220 for the year. Its service rating in my poll was 67% ‘great’ – which is very good. Other benefits: It also offers a £100 0% overdraft and 6% linked regular saver.
- New. First Direct rates number one for customer service, with 92% of its customers rating it ‘great’, and gives a free £125 (or more via some websites). You need to pay in £1,000 to get that.Other benefits: You get a 0% overdraft up to £250 and access to a linked 6% regular saver.
- New. HSBC gives a free £120 to switchers, though its service is middling, with 46% of its customers saying its service is ‘great’. Other benefits: Access to a 4% linked regular saver.
- The Halifax Reward deal isn’t new but it’s worth a mention. It gives a free £100, plus an extra £5 each month you pay in £750 and stay in credit. Its service is good, with 66% rating it ‘great’.
Q. Can anyone get these?
Martin’s A: You’ll be credit scored to get these. Though most people who have an existing bank account (unless it’s a basic account) should be fine. Yet to get the bonuses you normally need to use the bank’s switching service, have a couple of direct debits or standing orders set up, plus meet the minimum pay-in requirement (effectively a way of requiring you to earn a set amount).
If you can’t make a pay in each month, say, because you have irregular income, then M&S is an easy option. You can still get the £100 gift card, 0% overdraft and 6% linked savings without any pay in (you just don’t get the extra £10 each month).
Q. Aren’t there also accounts that pay high interest on your savings?
Martin’s A: Yes, that’s another form of competition, and if you have higher savings that is likely to be more lucrative in the long run.
The Nationwide FlexDirect and TSB Classic Plus accounts pay 5% on smaller amounts up to £2,500 (for one year) and £2,000 respectively. For more, Club Lloyds pays 4% on up to £5,000, and if you’ve more, Santander 123 pays 3% if you have between £3,000 and £20,000 in it. There is now a £5-a-month fee for Santander 123, but it also gives you cashback on bills of up to 3%, which for most people covers the fee, but even if not, if you’ve over £9,000 it beats owt else out there anyway.
Q. Once I’ve switched and got the free bonus can I switch again to another bank account?
Martin’s A: Yes, there’s nothing stopping you continually switching. But remember, you’ll be credit scored every time you open a bank account, so try to minimise opening too many accounts in a short space of time. This is especially true if you’re going to be applying for credit in the near future, like a mortgage.