Five features to consider when switching bank accounts, no matter your money style

Is switching bank accounts a good idea?

Is there a downside to switching banks?

Five features to look for when choosing to switch bank accounts

How does bank switching work?

Does switching bank accounts affect your credit score?

Making the decision to switch bank accounts

Is switching bank accounts a good idea?

Yes, it can be in the right circumstances. The right account for you can offer lots of benefits. However, most people tend to stick with what they know when it comes to banking and remain loyal to their original choice. That can be because of the perception that switching banks is an unnecessary hassle.

A poor customer service experience may lead you to look for a new bank. Another reason people switch is the need for a new banking feature that their current provider doesn’t offer.

There are a minority of people who regularly switch bank accounts to take advantage of better interest rates, lower overdraft rates, cashback and other incentives. Figures from Statista show that less than a million people (0.65 million, to be exact) switched their bank accounts in 2021. As of October 4, 2022, some 0.85 million people have switched in 2022, with more people possibly motivated by the cost-of-living crisis to find the best current account for them.

It is good practice to regularly review your finances and check if your bank is providing all the services you need. On some occasions, the bank you are using will meet all those requirements. But if not, it may be time to compare current accounts and research into switching bank accounts.

Is there a downside to switching banks?

Switching banks isn’t as simple as clicking your heels together. There will be some research involved as you compare the best current bank accounts out there, their perks, any charges, and what features they offer. You will also need to review your payments and gather documentation.

The process of switching your bank account can also take a few days, usually seven working days in total. Some online only banks are faster and allow you to apply online using their app.

Five features to look for when choosing to switch bank accounts

Variety is the spice of life, and everyone is looking for something different from their personal bank account. But what might be the right bank for you? Here are five highly rated bank account features designed to serve five different types of consumers. All information is correct as of October 2022.

1. Enticing interest rate for the money saver - Nationwide Building Society FlexDirect Account

   If you have a healthy bank balance and want to earn interest, there are many options that can help with this. Banks now have current accounts with attractive interest rates, which may be tiered or available once a set criteria has been met. If this is a feature you want to take advantage of, Nationwide Building Society’s FlexDirect account could be a strong switching option.

   This online account features access to 5%AER (annual equivalent rate) fixed in-credit interest for 12 months, subject to conditions. There is also limited access to bank branches and telephone support.

2. 250 interest-free overdraft for - the overdraft user - First Direct Current Account

   For those who need a little extra help sometimes, whether you want it as a buffer for bills or to keep it available for emergencies, an overdraft could be a feature you compare when switching. It’s important to consider the costs that can occur if an overdraft is not used responsibly.

   First Direct’s current account currently offers a £250 interest free overdraft. Anything over that amount is charged at 39.9% EAR (effective annual rate) variable, and there are fees for going over the limit.

   First Direct is also highly rated for its customer service by customers, according to an October 2022 survey by consumer champion Which.

3. Digital only for the smartphone banker - Monzo Free Current Account

   Many people now do most of their banking online or on an app. The convenience of having access to their bank account to manage their finances on the go can be a deal breaker when it comes to picking an account.
   Real-time spending or payment notifications, saving pots to manage money, and simple ways to pay friends are all benefits of Monzo’s free account.

   It is aimed at smartphone users, with an app to manage money and account applications taken through the app too.

4. Cashback on bills for The rewards customer – Santander Lite 123 Current Account

   Many accounts now have features that reward customers for spending or paying essential bills, a small perk, especially for something you pay regularly.

   You can earn while you spend with a cashback account like the Santander Lite 123. It currently offers 3% back on water, 2% back on energy and 1% on Santander mortgages, council tax, mobile, phone, broadband and paid-for TV paid by direct debit.

   There are conditions, and the cashback is limited to £15 a month in total, however.

5. Fee free abroad for the traveller – Starling Bank Account

   When travelling abroad, the fees can be expensive and confusing when it comes to withdrawing cash and making payments using your debit card. For people who travel frequently and want to use their regular bank account, there usually are limited options that offer this for free.

   Starling bank is one of the so-called ‘digital challenger banks’ which is online only. Its debit card can be used to withdraw and spend cash anywhere in the world with no fees - unlike some traditional banks which charge for this service.

Some of these banks will offer incentives, including cash, to switch and these are worth considering but are subject to change. When you compare current accounts, it is important to consider the long-term pros and cons of each bank account rather than just a quick win or immediate incentive.

Remember to check if there is a charge for that current account, how you will be able to access customer services if you need help. In the long term you may also want additional features such as a savings pot, so consider the future as well as the right now.

Knowing what features are important to you and taking the time to compare bank accounts will help you make the right choice. Of course, it’s not just adults who get to choose what bank accounts they want; teenagers aged 16 and above can do the same. While there may not be any “switching perks” for teenagers, there are bank accounts for 16 year olds with added features like higher interest rate on savings, mobile alerts and more.

How does bank switching work?

Once you’ve decided to switch and are certain you are eligible for the new account, it’s important to understand how to switch your bank account without any impact to your standing orders, or direct debits. Review your existing payments and collect any documents such as bank statements you wish to retain.

Apart from signing documents, the bank or building society will handle the transfer and could take up to seven working days.

Does switching bank accounts affect your credit score?

Opening multiple bank accounts frequently, for example to take advantage of cash incentives, can have an impact on your credit score. And if you are about to apply for a mortgage or significant loan, it is advised that it may be better to defer switching as lenders like to see stability and there could be delays in the process. However, applying for a new bank account generally only involves a soft credit check rather than a hard credit check, which shouldn’t cause any credit score changes.

Depending on your financial needs, another option could be to consider a prepaid card instead. These can offer special features such as zero ATM fees abroad or budgeting pots without the need to switch bank accounts.

Making the decision to switch bank accounts

Switching bank accounts is simpler than it used to be - and there’s many more options on the market. But it’s important to fully consider whether jumping ship is right for you, and to find the right ship to jump into.

There are many important things to examine; from whether you really need to switch to whether this is the best time in your life to make such a change. If you’re unsure of what type of account is right for you, take a look at our guide to personal bank accounts which can help you decide.

Take some time to review the banking features you use or don’t have access to already. Is being able to freeze a misplaced debit card instantly online a lifesaver? Or do you want more interest on savings? Is your current bank’s customer service lacking? Then look at the best bank accounts available for you which can improve upon your current service. Only then can an informed choice be made.