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Money saving

Could you gain by switching bank accounts?

Posted 30 January 2016

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Why not see if you could save, and earn, more by switching your bank account.

Be honest, how long is it since you thought about your bank account? Have you checked how much interest you get paid on any money you have in credit recently? Do you know how much you pay for your overdraft, if you have one? If you don’t know the answer to the two questions, you could be losing out by not switching to a better deal for you. 

 

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And it may not just be a lack of knowledge about your finances, which we can all be guilty of, that’s keeping you from switching your bank account, it could also be a misplaced loyalty to your bank too. In days gone by, you’d chose a bank and pretty much stick with it all your life. Ask your parents, we bet that’s what they did for years and years. 

Loyalty often doesn’t pay! 

While being loyal may have been beneficial years’ ago – on the odd occasion it still can be –  because loyalty earned you the best deals and special offers, these days, it’s often no longer true. Frequently, you’ll find that it’s the newest members of the bank that get the offers, to tempt them to switch. So there’s really no reason to be loyal any longer.           

Switching is simple! 

And the final reason we hear from people as to why they’ve not yet bothered to switch to a bank account that suits them better, is because they think it’s difficult and a hassle. Well, that used to be true, but not anymore, not since the introduction of the switching service

Forty of the UK’s banks and building societies have signed up to the service and it guarantees to make switching ‘simple, quick and stress-free’. You choose when you want the switch to take place, then all your payments in and out of the account, any direct debits and standing orders will all be moved over automatically, so you don’t have to do anything. And, all being well, it’ll all be done in seven working days. Finally, if any payments are accidentally sent to your old account in the 36 months following the switch, they’ll be sent straight on to your new account. It really couldn’t be simpler. 

So how do you go about finding out if you’ve got the best bank account for your situation? 

First you need to see what deals you have on the bank account you currently use. Either find the paperwork you received when you opened the account, or the latest letters you’ve received, regarding interest rates, and note down what interest you’re given on in credit balances. If you can’t find this paperwork, simply contact your bank and ask them for it. Also find out what you pay in fees and charges for any authorised and unauthorised overdrafts you may have. 

Ask yourself these questions

Now you have this information, you’re ready to go off and find out if you are already using the best bank account for you, or if you’d be better of switching to another. But, before you do, it’s a good idea to think about what you want from your bank account and how you’re likely to be using it. So, ask yourself these two questions:

 

1. Do you often spend more than you have coming in each month? 

If you do, the first thing we’d suggest you do is carry out a full budget on your incomings and outgoings to see if you’re able to cut back so that you remain in credit each month. As well as doing this, you should be thinking about a bank account that charges you the least for your overdraft, or you could be racking up unnecessary fees each month. 

It’s also useful to realise at this stage that spending more than you have coming in on a regular basis is likely to end in unmanageable debt. If this is the way you think you’re heading, or you’ve already arrived there, it might be helpful to speak to a trained debt advisor about your situation. 

And, don’t forget that you’re still able to switch bank accounts even if you have an overdraft. Some people think that you can’t switch unless you’ve paid the overdraft off, that’s not true, you can. And then you pay the overdraft back when you can afford it.  

2. Do you often have a surplus each month that you’d like to earn more interest on?

If you do, great! That’s a fantastic position to be in and you should make the most of your hard earned money by putting it somewhere it’ll earn you the most. If you don’t want to transfer it into a specific savings account, you should make sure that you are getting the best rate of interest on in-credit balances as possible.  In fact, at the moment there are a number of current accounts that actually offer better interest rates than saving accounts. This Plus Current Account from the TSB , for example, pays you 5% on balances up to £2,000, as long as you pay in £500 per month, and meet some other administration requests, like signing up for paperless banking.          

If you have a significant amount of money left over each month, that you’re not going to need access to anytime soon, it may be worth thinking about transferring it into a savings account. It will, more often than not, earn you more in interest in the long run this way. You can see the best savings accounts available here.

The answers to these two questions will give you a really good idea about what’s important to you. Of course, there may be other things you want to take into account, like other products that could be of use to you, like travel, mobile phone or home insurance packages. But, be careful because you could get a better deal purchasing there elsewhere. 

Make a comparison

Now you know what you’re after, it’s time to compare. If you use a comparison site like Uswitch, you’ll be presented with a page that looks like this:

 

Source: Uswitch.com

As you can see, you can filter the results so that the bank accounts which offer what you want the most are shown at the top whether that’s high interest, standard, packaged or the best accounts for those with bad credit. Now you can easily see what’s on offer and what you’d need to do to gain any benefits mentioned, for example, if you have to deposit a certain amount into the account each month.  

Do make sure you make a thorough comparison of the accounts on offer by checking the terms and conditions of each of the accounts you think might be more suitable for you. If you have any queries about any of the accounts, make sure you contact the bank or building society and ask.  

Are there any tempting incentives or offers you fancy? 

If you find a number of accounts offering you, for example, the higher interest rate you’re after, another factor that might come into play is what incentives are on offer. You can see from the example above that the last bank in the list, First Direct, offers you £125 when you switch. However, do not let these one-off offers tempt you into opening another account that doesn’t really fit your needs. Think of the long-term, not short-term, gains you’ll be making by switching.   

So, are you now going to go and check your bank account? You could be saving and earning yourself more just by switching, so it’d be a shame not to. 

However, if you feel your debts have already become too unmanageable for you, now’s the time you might want to think about speaking to a trained debt advisor, to see if there’s any way a debt solution could help you. You can speak to us using the ‘contact us’ on the left of the page.  

 

by Shelley Bowers

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.