Is it time to divorce your bank?
December 8th, 2009
It is often said that people are more likely to get divorced than switch bank accounts. David Black, of the financial research company Defaqto, says, ‘Just 6% of people move their bank account each year and the majority of these do so because of dissatisfaction with their existing provider’. A simple changeover could save you hundreds of pounds, so why are we so reluctant to change bank accounts? With internet comparison sites dedicated to ‘switching services’, and same-day electronic money transfers, it is much easier to move bank accounts than get a ‘quickie divorce’ – and certainly much cheaper. Banks and building societies are now required to follow strict guidelines that make the changeover as quick as possible. So nothing should deter you from investigating banks that will pay better rates of interest and will be cheaper or most rewarding for you. The question is which account should you pick? Much of this depends on how you use your account, so it is important to identify what type of bank customer you are, then pick the account that most suits your needs. Always in credit? If you never use an overdraft then you should opt for a current account that pays the best rate of interest. The high-street banks typically pay just 0.1% so look for an account with a more competitive rate. It’s also important that your current account has the day-to-day facilities that you most value such as an easy to reach branch, a debit card, cheque book or online banking for example. Regularly overdrawn? If you use an overdraft, even occasionally, then your priority should be to get an account with the cheapest overdraft rate. Ignore the generous interest rates paid on balances in credit as these are usually only paid up to a fixed amount. Are you a student? A student account is a day-to-day current account specifically for students in higher education with advantageous rates. All student accounts allow you to borrow at 0% interest provided you stay within the limits. So look out for an account which will give you the biggest and the longest 0% overdraft facility. Don’t just get drawn in by the freebies! Remember, never exceed the agreed limit without permission and never borrow more than you need. Are you a graduate? Whether you graduate with or without debt, once again look for a bank that will give you the biggest and longest 0% overdraft facility. Many banks offer ‘special’ accounts for graduates willing to pay a fee of around £5-£10 per month for a bigger 0% limit. But inevitably you could end up worse off, so try to opt for the best fees-free account available instead. And remember, after the special graduate deal ends do not be afraid to switch banks for a normal current account that will best suit your needs. Moving accounts can prove worthwhile and it should not take you longer than 10 minutes to fill in the relevant forms. The general format is to go to your new bank of choice and ask to switch accounts, telling them the name of your old bank and providing your account details. You will have to provide two forms of identification; one to prove who you are and the other to prove where you live. At most banks you need to fill in two forms; an application form and a transfer form. After that, the entire switch is automated by the bank. Your new bank has 10 working days to open an account for you once your application has been approved. Always read the small print before you decide on a new bank and remember the following: Shop around for the best rates of interestLook out for high charges on overdraft facilities and other servicesSome accounts offer freebies, such as breakdown cover on your car or free travel insurance. Check out beforehand whether there are any catches involved, like a monthly charge or having to pay in a minimum amount each month.
For more information on how to switch or on specific bank accounts check out www.moneysavingexpert.com, www.moneysupermarket.com, or www.thisismoney.co.uk. data supplied by credit action for a FREE financial consultation please call Mark or Clare on 0207 2886400