The five most popular reasons for switching bank
25 April 2021
It’s nearly two years since the seven-day switching service made it easier for all of us to change our bank. The competition to attract customers is as strong as ever, with offers and enticements galore available to us. Choose the right bank account and you could see an instant bounce to your finances.
The most popular reason to switch bank is to get higher interest, with 41% of customers looking to boost their savings, according to a survey by comparison site MoneySuperMarket.
Cashback and benefits such as insurance both attracted 20% of switchers, while the overdraft facility was the priority for 14%. The smallest group (5%) moved because they wanted a better standard of customer service.
With all this choice, how do you know which is the best option?
Well first of all – you don’t always need to switch bank to get these deals. With many, you can open up a second or third account as long as you meet the terms and conditions. You might also be tied to your bank, often the case if you have a mortgage.
However, if your current bank doesn’t give you anything extra, it’s worth exploring your options. Here are our thoughts on what to look for when switching bank.
Should you switch bank for higher interest?
It’s certainly true that right now you can get much higher rates of interest from some current accounts than any easy access savings account or ISAs.
However, these rates do come with conditions.
There’s often a cap on how much money you can earn interest on. This varies from account to account, but you might only get say 2% on the first £2,000 and nothing after that.
You might also have to pay in a minimum amount each month. It doesn’t necessarily mean you have to keep it there, but you need to make sure your salary can cover that amount.
It’s also worth thinking about any debts you have. You might find it better to pay off those debts than save as you could be paying more in interest owed than the amount you’d earn.
Should you switch bank for cashback?
Cashback can be a great addition to your income, especially if you normally spend money with the shops and companies that offer it.
This could be a good option if you don’t have much in savings and don’t go overdrawn.
You can also find some tempting switching bonus cashback offers, where you’re given a one-off cashback payment of between £100 and £150 for switching.
However, the extra money, while useful, probably won’t be a huge amount over the year, and there could be a monthly fee attached to the account.
Should you switch bank for rewards and benefits?
If you’re already shelling out for breakdown cover, ID fraud assistance, or travel, gadget and phone insurance, you might find you can get these for free with some bank accounts.
Be aware though that you often get charged a fee for these premium accounts.
If you are tempted, first find out how much you are paying and see if you really do make a saving once the bank’s fee is added in.
Should you switch bank for overdrafts?
If you are often in your overdraft, you really should see if you can get a better deal at a different bank.
First, see if you can get an interest-free overdraft. These are often for small amounts but that could be enough to keep you going until payday.
If you think you’ll exceed the limit regularly, look at the charges for both authorised and unauthorised overdrafts. Paying less each month for going into the red could help you get back towards staying in credit.
Should you switch bank for customer service?
If this is important to you, there are some banks that have a strong reputation for dealing with customers quickly and fairly.
You’ll probably find you can get one of the other bonuses listed above with the better-regarded banks, so this could be how you make a decision between two or three different banks.