Switch your bank account in 5 steps
By September 2013 banks must allow customers to switch their current accounts within seven working days, Chancellor George Osborne has announced. In a speech about the future of the banking industry, he said that he wanted consumers to be given the 'most powerful weapon of all - choice'. The hope is that the reforms will make it quicker and easier for people to switch current accounts, and encourage smaller providers into the marketplace.
Currently, a massive 75 per cent of the £9 billion current account market is in the hands of just four big banks: Lloyds, RBS, Barclays and HSBC. But you don’t have to wait until September to switch if you are unhappy with your current account provider, or think that you can get a better deal elsewhere.
Even now, most account transfers go through within 10 working days. And with the best current accounts offering a range of benefits, including cheap overdrafts and great credit interest rates, there is no reason to stick with a lacklustre deal.
Our five-step switching guide explains how to move to the best current account for you.
Step One: Choose a new account
There are hundreds of current accounts available, and the best one for you will depend on your circumstances...
If you are often in the red, for example, an account offering a low-cost overdraft facility will help you to save money.
But if you rarely go overdrawn, an account offering high credit interest is a better choice.
MoneySupermarket’s best buy tables reveal that First Direct’s 1st Account not only rewards switchers with £100 cashback, it also has a £250 fee-free overdraft buffer.
For those seeking credit interest, meanwhile, the Santander 123 Account pays 3% on between £3,000 and £20,000.
Step Two: Apply for a new account
Once you have chosen a new account, you should approach the bank or building society that offers it.
You will usually be asked to fill in an application form and provide two forms of ID – such as a passport and a gas or electricity bill. You may also need to provide details of any direct debits or standing orders paid from your existing current account.
The bank or building society will then contact your existing account provider before sending you a list of regular transactions such direct debits that you can choose to have transferred.
Step Three: Tell your employer
While the bank or building society you are switching to should transfer direct debit and standing orders to your new account according to your instructions, it is usually your responsibility to contact those who makes regular payments into your account.
Whether it is your employer, an individual or a pension provider, they will require your new account number and sort code.
Step Four: Leave some cash in your old account
If the companies to which you make regular payments fail to respond immediately to your new current account provider, you may find that one or more payment continues to be taken from your old account.
It is therefore sensible to leave some money in that account for a month or so to ensure that you do not incur any unnecessary charges.
Step Five: Know your rights
Most banks and building societies now have dedicated switching teams to ensure that current account transfers run smoothly.
If, however, there is a problem with a payment – for example an unpaid direct debit – you should contact your new current account provider immediately and ask for any charges to be refunded.
If the situation has not been resolved within eight weeks of your complaint, you can also ask the Financial Ombudsman Service to investigate your case.
Every week, Clare Francis, financial journalist and editor-in-chief of comparison site moneysupermarket.com will offer tips and advice on all things money-related to help iVillagers make the most of their hard-earned cash. From energy bills to car insurance; credit cards to children’s savings accounts; mortgages to discount vouchers Clare will show you how to make sure you’re getting the best deal. For more, visit Clare Francis on Google+.