Q&A: Switching bank accounts

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A survey for Santander has found that 20% of those questioned would rather go to the dentist than switch their bank accounts.

But in theory, the process of switching is about to become less painful.

From 16 September, Britain's 46 million current account holders should be able to move their bank account to another provider within seven days.

This follows a recommendation from the Independent Commission on Banking, two years ago, which said there should be more competition in the market.

So how easy will it be to switch? What could go wrong? And what guarantees do you have if your bank makes a mistake?

How common is switching now?

Last year, 1.2 million people switched accounts through the automated service, and another 800,000 did so manually, according to the Payments Council. That is about 2 million in total. Given there are 80 million accounts in the UK, that suggests around 2.5% of customers are switching every year.

Where do we bank at the moment?

The big four High Street banks have about a 75% share of the market, according to the Office of Fair Trading. Lloyds Banking Group (which includes TSB, Halifax and Bank of Scotland) is the largest bank in the UK, with 25.5 million accounts. Lloyds has around 28% of the personal account market, Barclays has about 14%, RBS (which includes Nat West) has 13%, and HSBC has 12%, according to John Gilbert Financial Research.

How long does it take to switch at the moment?

The Financial Conduct Authority says new accounts should be ready within 10 working days. According to the Payments Council, it can take up to a month in practice.

Virgin Money branch Virgin is planning to offer current accounts

How can I switch?

You can contact your new bank, or choose a new one via www.simplerworld.co.uk. Once you have switched, payments in or out of your old account will be automatically re-directed for a period of 13 months, to cover once-a-year payments. So your employer, for example, will be notified, and payments will be automatically switched to your new account. No one whom you pay, or who pays you, will have to take any action.

So how long will switching take?

Once your new bank has acknowledged your application, the switching will take seven working days. Or the switch can happen on a date of your choosing.

Do I have to notify my old bank?

No, you only need notify the new bank. It will tell your old bank, and transfer all your direct debits and standing orders automatically. You will be given a new bank account number, and a new sort code.

What happens if I miss a payment as a result of the switch?

If anything goes wrong, and you miss a payment, your new bank will refund the charges, and make good any direct debits that did not go through.

Can I still switch if I am overdrawn?

This is down to your new bank. Depending on the size of your overdraft, they will chose whether to still accept you. They might increase (or decrease) the overdraft charges.

Which banks can I switch to?

Seventeen banks are participating in the switching scheme, involving 33 different brands. Lloyds is the largest bank taking part. The Reliance Bank, part of the Salvation Army, is the smallest. New entrants into the market include Metro and Marks and Spencer. Tesco is planning to enter the market early in 2014. Virgin is planning to offer a current account, but has not yet announced a date. Two building societies are taking part: Nationwide and the Cumberland.

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