Q&A: Switching bank accounts
- 11 September 2014
- From the section Business
A survey for Santander found that 20% of those questioned would rather go to the dentist than switch their bank accounts.
But in September 2013, the process of switching became a lot less painful.
That was when Britain's 50m current account holders were first able to move their bank account to another provider within seven days.
It followed a recommendation from the Independent Commission on Banking, which said there should be more competition in the market.
So how easy is it to switch? What can go wrong? And what guarantees do you have if your bank makes a mistake?
How common is switching?
Before the 7 day switching service started, around a million people switched bank accounts every year. In the first two years of the service, 2.25m switched. But the number of switches declined by 14% between 2014 and 2015.
Where do we bank at the moment?
The big four High Street banks have a 77% share of the market, according to the Competition and Markets Authority. Lloyds Banking Group (which includes Halifax and Bank of Scotland) is the largest bank in the UK, with 27% of all current accounts. Both Barclays and RBS (which includes Nat West) have 18%, and HSBC has 12%, according to Cass Business School.
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?
Forty banks are now participating in the switching scheme. 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 entered the market early in 2014. Virgin has also launched an account. Two building societies are taking part: Nationwide and the Cumberland.