During very recent times, when interest rates were low, it hardly seemed worth switching accounts. However, recent months have seen interest rates rise significantly. Although they are falling back a little, there are still quite a number of accounts paying 5% or more. According to the latest reliable figures some 114,000 people switched their current account in the first six months of 2023 alone. If you’re wondering whether to switch your current account or not read our tips on what to look for and how to go about it with as little stress as possible.

Why Switch Your Current Account?

Most people give as their two main reasons for wanting to switch bank accounts:

• Dissatisfaction with the service from their current bank, either from low interest rates or inaccessibility
• Interest rates, special offers such as cashback or discounts on shopping and better customer service available elsewhere

It’s important to weigh up the pros and cons of switching banks before you jump. Look at things such as its accessibility for you. Does its banking app suit your requirements, for instance? If you are currently overdrawn will your new provider offer you the same deal as your current bank? If not, you need to consider whether you can pay off your overdraft before the switch. Make sure your new bank is offering attractive interest rates which won’t disappear after a short time, or perhaps a cash bonus to switch. Also look at whether you are required to pay in a set amount every month or switch a number of direct debits to the new account. Failing to meet the required criteria may disqualify you from any perks or favourable interest rate.

How Does Switching Work?

With the current account switch service (CASS) the process should be simple and stress-free. You should make sure the bank you want to switch to is registered with the service. Then follow these simple steps:

• Open a new account with your chosen new provider
• Choose the date you want to make the switch
• Seven working days before the switch date your new provider will set up your new account. Do not set up any payments before you are notified that your new account is ready.
• All incoming payments such as salary, benefits, direct debits etc will automatically be switched to your new account. Any payments due to your old account will be redirected.
• If you find that you lose interest or incur any charges because of the switch your new bank should refund you. Make sure you keep an eye on your transactions initially and contact your new bank if you think this has applied to you

 Can You Switch Multiple Times?

There’s nothing to stop you doing this, but beware of any effect on your credit score. Switching your bank account will not necessarily have a detrimental effect on your credit score. However, bear in mind that applying for several accounts in a short time may impact your credit score. So too could exceeding your overdraft limit. 

How Long Does It Take To Switch Your Current Account?

Previously, to switch a bank account, people would have to contact their bank, and all those who they make payments to individually. Thankfully, this is no longer the case. In the UK now, switching your current account typically takes around 7 days to complete. There is a guarantee in place for such switches, known as the Current Account Switch Service (CASS). This is a free service, and is offered by many banks and building societies. The guarantee means that switching your balance and redirecting all of your direct debits, as well as handling incoming and outgoing payments and closing your account should be done within a week. 

In some cases, you may be able to choose the date to switch, although not all banks and building societies offer this. It is best to speak to your bank to see if this can be arranged for you. 

Does Changing Banks Impact Your Credit Score?

Changing bank accounts can impact your credit score for various reasons. Typically, this is only temporary. However, your new Bank will need to perform a hard credit check on you. For a short time, this can leave a mark on your report, lowering it slightly.

Another way in which switching bank accounts can impact your credit score is if it shortens your credit history.

Typically, a longer credit history is preferable to lenders.

However, these initial dips in your credit score should not cause damage to your credit health long-term. Any slight tips should write themselves within a few months.

Is it a good idea to switch banks when changing your mortgage?

Generally, switching your bank account when remortgaging can be risky. Anything that impacts your credit score, even short term can impact your mortgage offer. In addition to this, while switching is relatively stress free with the CASS, you will likely have enough paperwork to complete for your remortgage. 

However, it may not impact your mortgage offer if you are simply switching mortgage with the same provider, or your mortgage has already been approved. Speak to your bank and/or lender in this case to see what they advise about switching accounts while your remortgage is going through. 

To sum up, whether you should switch current accounts really depends on your financial situation, the benefits on offer and any other credit you may have. However, staying with one bank isn’t always the best choice, especially if you can get better perks, including interest rates, elsewhere.