Don’t whinge about your bank. It’s not productive. Instead, ditch it and switch. Sadly, millions of people are with their bank account because they got free piggybanks aged eight, and even if service has been dire, decades later they’ve never moved.
No wonder banks mis-sold willy-nilly. Unless we jump ship after poor rates and service, banks won't improve. Thankfully, it’s now likely to be easier than ever before to switch account, so it's time to take advantage. Here are the key need-to-knows:
• Seven-day switching's now live. For the first time, almost all banks now promise to switch your current account, including all direct debits and standing orders, within seven working days. It used to take up to 30.
Yet the really big change is the one that’s rarely mentioned – when you switch, your old account will be closed, and for the first time, any money paid into it for 13 months after the switch will be auto-forwarded to the new account.
• Take a £125 bribe to switch. A bribe’s normally bad but if banks are willing to throw cash to get switchers, grab it. Here are my top picks:
- Free £125, top customer service and 6% linked savings. www.firstdirect.com has smashed every customer service poll I've ever done. In the most recent, 93% rated it 'great'. New switchers currently get paid a boosted £125 (normally £100), a £250 0% overdraft and linked 6% regular saver account.
To qualify for this, without paying a fee, you need to pay in a minimum of £1,000/month. That doesn’t mean you can’t then withdraw it – it’s effectively just a way of saying you must pay your income in and earn a salary equivalent to £13,600+ a year.
- Earn cashback on bills and 3% on savings. The most innovative account is Santander’s 123 (www.santander.co.uk/123). It pays 3% AER variable, nearly double the best buy savings on balances of £3,000 to £20,000, plus up to 3% cashback on bills, including phone, energy, council tax and Santander mortgage repayments which, for most, dwarfs its £2/month fee. It has a lower minimum pay-in amount, of just £500/mth, equivalent to a £6,000+ salary.
To show how this works, here’s a tweet I got (@martinslewis) from Kelly: "I have a 123 account and get about £18/month back after my fee – fantastic. £6 just for paying my mortgage."
- Free £100 and £5/month if in credit. Halifax Reward (www.halifax.co.uk/reward) offers switchers a £100 bribe and pays £5 each month the account stays in credit. It's also got a six months 0% overdraft, but charges after that are huge, so always pay it off before then. The minimum pay-in here is £750/month, equivalent to £9,200+ salary.
These deals change regularly. For my full, daily-updated list, go to www.moneysavingexpert.com/bankaccounts
• Top accounts if you’re ever overdrawn. An overdraft is a debt pure and simple, often with higher interest rates and charges even than credit cards. So treat it like a debt and manage it down. My top picks...
- Free £125 and £250 0% overdraft: As well as the free £125, First Direct (www.firstdirect.com) offers an ongoing 0% overdraft, though only on the first £250. If that's enough, it wins.
- 0% overdraft for a YEAR: Nationwide FlexDirect (www.nationwide.co.uk/flexdirect) gives 0% for 12mths. See that as respite to sort your finances to clear it, or there's a 50p/day overdraft fee after.
Shift it to a 0% card: The Virgin Card (http://uk.virginmoney.com ) lets accepted new cardholders shift overdrafts to it for 26mths 0% for a 4% fee. Very few cards do this cheaply, so don't assume it's a universal function of all cards. After the 0%, it's 20.9% rep APR though, so ensure it’ll be clear by then.
If you are overdrawn, crucially, make sure you know how much by and never go over the limit, or bank charges are hideous.
• Family worldwide travel, smartphone and breakdown cover £10/month. Packaged bank accounts, where you pay a monthly fee, are like Marmite – they're a love or hate thing. Many are paying over the odds for services they don’t use and should cancel.
Others were mis-sold a worthless policy they couldn’t use and are due years of fees back totalling £100s or £1,000s (full help at www.moneysavingexpert.com/bankfeesback). Yet, done right, they can be a bonanza.
My top pick's www.nationwide.co.uk/flexplus where, for £10/month, you get worldwide family travel insurance up to age 75 (usually about £150), European breakdown cover (usually £60) and mobile insurance for all the family’s smartphones (usually £70 each).
• Top ethical deal. If bank behaviour is a key decision-maker for you, my top fee-free ethical pick is Nationwide's FlexAccount (www.nationwide.co.uk/flexaccount), which also offers free European travel insurance for all named account holders up to age 75.
This is based on my view of the account’s offering combined with a rating from Ethical Consumer. Do also check if your local credit union offers a bank account.
• Will switching hit my credit score? Yes, but, for most, it’s minor and shouldn't be an issue. But if you're about to make a serious credit application, for example, a mortgage, wait to switch until after that.
The reason for the impact is two-fold. Firstly, applying for a new account requires a credit check for the overdraft, which leaves a footprint on your file. Also, a long relationship with your bank (providing it's good) is a positive. Switch, and this takes a little while to rebuild.
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