Switching Your Bank Account

It seems most people don’t think about changing bank accounts because they don’t see much difference between all the various accounts, and so are put off doing so. However, if your account is in credit and you don’t receive interest from your bank, or, if you’re over drawn and are being charged a high interest rate for the borrowing, then you could well benefit financially from changing banks.

Start by working out what you want from your bank account, and then compare what’s available. Comparison sites such as Moneyfacts, Moneysupermarket.com and uSwitch can search for bank accounts with best interest rates on overdraft facilities as well as for the interest rate you receive for being in credit.

Look at how you’ll bank and what you want from your bank – do you want to be able to bank online, by phone or in branch? Look out for short term offers such as cashback when you switch accounts, and do remember to read the small print. It might sound boring, but that small print can really make a difference and tell you what you have to do to qualify for the higher interest rate or the cashback payment etc.

Another thing to think about is the ‘faster payments’ scheme. Some banks have signed up to it, and others haven’t. If you want to be able to send money to someone in hours instead of days then look for banks which have signed up to this scheme, and avoid those who haven’t.

Look at one off payment limits too – most banks have a high limit around £10k, but some (Santander for example), have much lower limits (Santander’s is just £300).
Changing banks can take around 3-4 weeks, so make sure you’ve planned for those weeks in advance, and check that the bank will keep you informed about the process.

The Financial Services Authority website has information on it about switching bank accounts and can be quite useful. Also, if you’re account hasn’t been moved after 15 working days (3 weeks), then you should get the bank to chase this for you. It can also be worth asking if you’ll get a free overdraft for the period to cover the switch. For example, if a direct debit comes out of the new account before the money has gone in to cover it than you don’t want to find yourself with large overdraft fees.

The Banking Commission has offered recommendations which if introduced in 2013 as planned, will mean that the process of changing banks will take no more than 7 working days and it will be the responsibility of the bank who you are moving your account TO, to make certain that everything in the process of the changeover goes smoothly.

Why switch bank account?

For many, the prospect of needing to switch bank account isn’t something to be viewed with any enthusiasm.

Yet switching a bank account isn’t as difficult as it may sound and it may bring you benefits.

Why change?

There may be many reasons.

Perhaps:

• you’re unhappy with the service you’re receiving;
• the service is fine but your current bank just isn’t offering the same product range or savings rates;
• you have seen that another bank has better internet banking services etc.

Whatever the reason, you may start to contemplate the need to switch bank account.

The process

Nothing could be easier.

If you were, say, moving your banking from Lloyds TSB to The Nationwide Building Society, all you’ll typically have to do is:

• contact your new bank and ask to open an account with them;
• you’ll need to comply with the legislation that requires that you prove your identity and place of residence;
• assuming all is approved, simply wait for your account to be opened.

Your new bank will typically arrange for the transfer of all existing standing orders etc.

Things to think about

Although it may be much easier than you suspected, it is worth remembering that there are a few intangible issues to keep in mind:

• be sure that your new bank will be able to give you the facilities and advantages that you’re looking for;
• take the time to investigate this in some detail;
• remember that some banks still place a great emphasis on an established relationship – if you’re well known to your current bank and have a relationship that has existed for many  years, that may count for something in situations such as loan applications etc.

However, ultimately being known and even liked by your current bank may not particularly result in your getting the service and products that you need.

If that’s the case, then looking around for alternatives may make sense.

Today the financial services marketplace is very competitive. Shopping around has never been easier and to switch bank account isn’t as time consuming or traumatic as it once was.

What you’ll need to open a bank account

To open a bank account is often relatively easy – but it may be even more so if you’re prepared in advance.

Bank accounts

In the modern world it’s not easy to manage your finances without a bank account.

In fact, many aspects of modern life are now built around the assumption that you have one.

For example, the majority of employers will no longer pay by cash but only via bank transfer or cheque – meaning you’ll need some form of bank account to get paid.

Of course, you may wish to open a bank account even if you already have one or indeed several.

It could be that you’re simply looking for a more attractive deal or more facilities than you’re currently getting from your existing bank.

How to go about it

The first thing you’ll need to do is to consider what sort of account you’re looking for.

Perhaps the most common is the current account. Many people regard this as their everyday working account and it may bring with it a chequebook and plastic debit card etc.

There are also many other forms of more specialised bank account including things such as savings accounts which pay a more attractive rate of interest on money you have in credit balance etc.

Once you’ve decided what sort of account it is that you’re looking for, you’ll then need to think about what bank or building society you’d like to open a bank account with.

That involves looking around to see what offers and account types are available and which appears to be the closest to your needs.

To open an account

Once you’ve made your decision, you can apply to open the account.

What happens next may vary depending upon the bank concerned and your situation but it’s important to keep in mind the following:

• banks are now obliged by regulation to verify the identity of their account-holding customers – if you are not already known to the bank this will involve you in proving your identity and place of residence.

This is required to avoid criminal activities such as money laundering and applies to everybody – you are not being singled out!

Applications can typically be made online and take only a few minutes. You’ll typically need to provide:

• your full name;
• details of your employer;
• your address details for the past 3 years;
• your national insurance number.

If you’re unemployed or a foreign national without a NI number, you should speak to the bank for specific advice relating to your situation.

Some banks may ask for proof of address separately.

Assuming your application is approved, your account may be opened very quickly and within several days you may be able to receive your chequebook etc.

Open a bank account

If you are looking to open a bank account then the first thing you need to be clear about is what type of account you are looking for.

There are now many various types of account available including:

• current account with a cheque book and debit card;
• standard account with debit card only;
• savings account with instant access;
• savings account with limited access;
• long term high interest savings account.

There will be, in reality, very likely many more to choose from.

In many banks, there may also be a fairly wide number of different account options available within these broad categories. The most obvious examples of these may be children’s’ or student bank accounts.

If you need to open a bank account for business purposes, you should make this clear, as there may be a whole different set of options available to you.

How to apply

The exact process will be partly dependent on the type of account you’ve opted for and the bank you’ve selected. For example, some banks may offer facilities for opening a bank account online.

What the bank requires from you to be able to open a bank account may also depend upon the account type you’re looking for. Regulations here have also been tightened over recent years as part of anti-fraud and money laundering prevention.

As a general rule, the bank may require:

• evidence of who you are – that may involve providing a copy of a passport or a photo driving licence;
• proof that you reside where you say you do – perhaps they will accept a copy of a utilities bill such as gas or electricity in your name;
• specimen copies of your signature;
• in some cases, possibly various forms of tax declaration;
• possibly details of your current employment / NI number.

If you have moved within the past three years, you may be asked to show evidence of your residence at the previous address.

Background checks

Although individual bank policies may differ, you should anticipate that the bank might make a credit history check and possibly confirm that you’re on the electoral register.

If you are not a UK national, the process may vary slightly.

Time

Although this may appear a lengthy process, typically it is completed fairly quickly.

Assuming no issues come to hand, you should receive a chequebook and bank card relatively quickly – although some banks may have special policies for new account openers if they have credit history issues.

To open a bank account isn’t difficult once you have all the required information to hand. However, do note that some people – particularly those who have been declared bankrupt – may have a limited choice of bank accounts available to them.

The internet savings accounts

In times of low interest rates, savers need to look for all the help they can get. That’s why it may be worth your while looking at internet savings accounts.

Why?

In a nutshell, it’s due to the fact that you may be able to see offers and savings deals that are not available through the conventional high street branch networks.

Why?

Well, that’s all to do with economics. It’s comparatively expensive for banks and building societies to deal with customers walking in the front door of their branches.

It’s a lot cheaper for them to work with you through the internet. At the same time, as an additional benefit, your electronic banking facilities may improve your overall banking experience.

So, the cost to the bank of administering your savings account is often a little lower, more attractive interest rate or other benefits.

If you’re not already a user of internet banking, it might be worth finding out more about it.

Not only may you find it more convenient but you may also be able to see internet savings accounts that are suitable for your needs.

Bank cards explained

If you say you are looking for bank cards, did you know that this could mean two completely different things?

Bank cards are usually associated with bank accounts. These will be the cards that perhaps you may use alongside any cheques you write or when you pay using the ‘Chip and PIN’ system, or when buying stuff online.

However, bank cards could also mean for some people, credit cards.

So what are the differences?

Before we start, it should be noted that there are many different variants of bank or credit cards and to look at all the options would take up more than one article! Here we discuss the main differences.

Bank cards
These are the cards that you typically get as part of your bank account:

• When you use these cards, the money comes straight out of your bank account;
• You can withdraw cash (up to a set limit) from your bank account using this card and in most cases (as long as you are in credit), you will not incur a fee.

Credit cards
These are the cards that are not linked to your bank account. You may have a credit card with your bank, but the two accounts are usually separate:

• When you use these cards, the money builds up on your credit card account. Once a month you will receive a statement detailing how much you have spent on your credit card and you can either clear that balance in full or pay the minimum amount (which will usually incur an interest fee);
• You can withdraw cash (up to a set limit) from your credit card account using this card but in most cases you will incur a fee (normally a percentage of the amount taken out);
• Purchases made on a credit card may often give you more protection. Say for example, you bought something online on your credit card and it never arrived but you did not get a refund, your credit card provider may refund you the money themselves and pursue the seller themselves.

So, these are some of the key differences explained between bank cards and credit cards. When applying for any sort of financial product, whether a bank card, bank account or credit card, do ensure that you fully understand what you are signing up for to ensure that it will meet your needs.

Comparing bank accounts

In the days before the internet, if you wanted to get a bank account – and get the right one for you - you had potentially three options: use the bank that your family used; compare bank accounts by wearing out shoe leather traipsing up and down the local High Street and picking up leaflets to see who offered the best deal; or go with the bank that was affiliated with your employer. Even doing all this could not necessarily get you the most suitable bank account for your circumstances.

The good news is that the internet has opened up a whole new world of choice for any one investigating bank accounts. There are comparison websites that allow you to compare some of the main features and benefits of taking an account with a certain provider and you can also do your own research too by visiting different banking websites.

So what do you need to consider when looking at opening an account?

Online, telephone or in branch banking?

What best suits you? Do you like the personal approach (and potentially long lunchtime queues) by visiting your local branch or you happy to do it via the post, online or via the telephone?

You need to think which option may best fit in with your lifestyle – for instance, people who work nights may not want to spend their day time (when they should be sleeping) in a bank! Similarly, if you like to manage your account on a daily basis, having online banking may be the right choice for you.

There are a number of options potentially for you to choose from, with some banks providing a combination of most of these services or only some. It is up to you to decide what will be most convenient for you.

Considerations

Other things to think about when choosing bank accounts are:

• Recommendations - ask around colleagues, friends and family for which bank they sue and what they think of them.
• Products - think about what you may need from your bank in the future (a loan, mortgage etc.) and whether they will provide attractive rates to existing customers.
• Fees / costs – bank charges may vary, so do look in to who charges what.

So, if you are looking at comparing bank accounts, hopefully these pointers may help you in finding the most suitable bank account for you.

Which bank account?

In the old days, when it was time for you to get a bank account, it was usually a case of you going in to your nearest town and opening up an account with the ‘family’ bank. (ie the bank that your mum and dad and maybe brothers and sisters used). Or, the day you started work, you were taken to the nearest bank to your workplace by your team leader who would help you set up a bank account.

However, things have changed dramatically, and there are potentially a lot of choices to be made when looking to opening a bank account.

Ease of use

First of all, you need to decide what you want from your bank. Among the considerations are:

• Ease of use – do you want to be able to walk in to a branch near you to pay in cheques and pay bills etc or are you happy to do everything by post?
• Do you want to be able to manage your bank account online?
• Do you want telephone banking? Etc

There are a number of options to choose from, with some banking organisations offering a combination of most of these services or only some. You need to decide what will be most convenient for you.

Word of mouth

Once you have looked around at the different banking organisations that appear to offer what you want, ask around friends and family for their recommendations. If you ask enough people, everyone will generally have something bad to say about a particular bank! But asking for people’s views may help you build a picture up as to who, overall, may offer you the best banking solution.

Product range and fees

Two things to look at when comparing bank accounts are:

• The product range
• Fees

If you think ahead to what you may want from your bank in the future (a loan; mortgage; maybe a fixed rate bond etc), and whether they offer existing clients preferential rates, this may help you in your choice.

Similarly, look at fees. Some banks may offer interest free overdrafts for a period of time whereas others will charge you.

Incentives

Finally, don’t forget to look for any incentives for joining a particular bank. These can range from cash benefits to a free piggy bank to a bank account that offers you absolutely nothing for signing up with them!

Why online savings?

Using online savings products may be able to earn you that precious extra little bit of interest on your money.

Many building societies and banks are desperately keen to encourage their customers to use their internet e-banking facilities rather than the traditional branches.

That’s not because they love computers. It’s simply because it’s more cost-effective for them to deal with you electronically than in person.

Therefore, if you are an internet customer you cost them less and this means that they can pass on some of that saving to you in the form of different savings and related products that may only be available on the internet.

If you are not familiar with internet banking then don’t worry – it’s easy to use.

It also brings with it the added advantage that you’ll be able to do a number of things from the comfort of your own living room that previously would have necessitated a journey into town and a long walk along the high street to the branch.

So, you can watch your savings grow from your own armchair at home and know that you’re perhaps getting a deal that wasn’t previously available.

In fact, watching your online savings grow from your home may be the best entertainment on the box that entire day!

News: Sharp fall in consumer debt write-offs

Banks and building societies wrote off £1.83 billion of unsecured debt that people were unable to repay during the third quarter of 2010 - 47% less than the £3.47 billion recorded during the first quarter of the year, which was the highest the Bank of England has seen since it began recording the data back in 2004.

The sharp fall was driven by a decline in the level of credit card debt consumers couldn’t keep up with - with creditors writing off just £740 million during the third three-month period of the year, compared with a staggering £2.14 billion during the second quarter.

The £2.14 billion recorded in the second quarter of 2010 represented only the third time the figure has ever exceeded £1 billion.

Write-offs spreading across all forms of lending improved - with written-off mortgage debt dropping by 27% to £134 million.

Defaults on other types of debt - loans, for example, and overdrafts - fell by 17% to £959 million.

Meanwhile, separate figures from the Insolvency Service have revealed that the number of people declared bankrupt during the penultimate quarter of 2010 dropped to a five-year low.

A debt adviser commented: “On the one hand, it is encouraging to see a sharp fall in debt write-offs and personal bankruptcies - this may point towards improving personal finances.

“However, there are still many people struggling with their debts, and we would like to reassure these people that defaulting on a credit agreement - although it will damage their credit rating - won’t mean their access to all financial products is restricted. For example, if an individual wanted to open a bank account, they could apply for one of the various ‘bank accounts for bad credit’ - a type of bank account suitable for people with a poor credit history.

“It is also important to understand that there is help available, and it may only be a few clicks away. Seeking professional debt advice sooner, rather than later, could make all the difference when it comes to a borrower clearing their debts. Individuals can seek debt advice online, and have an experienced debt adviser call them back at a time to suit them.”

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