Bank switching should get easier from today, with the launch of a guarantee to ensure all your incoming and outgoing payments will get moved to your new accounts, along with a promise the transfer will happen within seven working days.
This means the age-old fear that you'll miss crucial payments such as mortgages, council tax, or that your employer will send your salary to your old account, could be a thing of the past if banks keep their promises (see our Best Bank Accounts guide for the top deals).
Under the new Current Account Switch Service, you'll be able to nominate any switching date to move to your new account, provided it is seven working days or more away. Before the guarantee, switching took about 18 to 30 working days.
What exactly are they guaranteeing?
- For 13 months after you've switched, your new provider will arrange for payments accidentally made to your old account, or taken from your old account, to be automatically redirected to your new account. It will also contact the sender and give it your new account details.
- Your new provider will move payments going out, such as direct debits and standing orders, and those coming in, such as your salary, to your new account.
- If you have money in your old account, this will be transferred to your new account on your switch date.
- If there are any issues in making the switch, your new provider will contact you before your switch date.
- If anything goes wrong with the switch, your new bank will refund any interest (paid or lost) and charges made on either your old or new current accounts as a result of this failure. You'll have to ask your new provider for this, though.
- The service is free to use and you can choose and agree your switch date.
Is there anything to watch out for?
Yes. Recurring payments, also known as continuous payment authorities, are not part of the guarantee. These are set up using your debit card details, rather than your account number and sort code, and are often used for telecoms bills, gym membership and payday loan repayments.
So if you switch bank account, you'll need let the companies concerned know your new card details, though it can sometimes be hard to find a full list of these.
Also, when you'll get your debit card and Pin isn't covered by the guarantee. So despite your account being open and set up in seven working days, you may have to wait longer to access it.
The Payments Council, which is in charge of the scheme, says it's down to providers to ensure customers have their debit cards and Pins by or on the seventh working day of the switch.
How long will the switch take?
The switch takes seven working days to take effect. You can select and agree a date with your new bank or building society that you want to start using your new account from and the process will start six working days (Monday to Friday excluding bank and public holidays) before that date.
I want to switch bank accounts. How do I do it?
Once you know which bank or building society you want to switch to, you just need to let your new provider know and it'll do all the work for you – you don't have to tell your existing provider.
Up until the seventh working day following you asking to switch, your existing account will function as normal. So all payments in and out will be taken or paid when they're due, and whatever money you had in your account will remain in there.
On the seventh working day after you've asked to switch, or on the switch date set by you – whichever is later – you'll have access to your new account. Once you do, you should see your balance has been transferred, and payments coming out, such as direct debits and standing orders, have been moved over.
The really big change is that payments going into your old account, such as your salary or cheques paid in, will also be auto-forwarded to your new one, so you won't miss out.
From that seventh working day, you'll no longer have access to your old account.
Will my old account be closed automatically?
If you switch under the seven day guarantee your old account will be automatically closed for you as part of the switching process. You'll no longer have access to it from the seventh working day of the switch.
If you want to keep your old account open, you can't switch via the new scheme. The only way to keep your old account open is to switch via a similar process to the old method. Here, it can still take up to 30 days to switch and your payments going in and out are not guaranteed to be redirected.
What are the top banking deals?
If you're always in credit, our best buy current accounts include top customer service bank First Direct* (minimum pay-in £1,000/month) and Halifax* (minimum pay-in £750/month), which give £125 and £100 respectively to new customers switching to them, and Santander's 123* account (minimum pay in £500/month), which pays 3% interest for those with £3,000 to £20,000, plus cashback of up to 3% on bills paid by direct debit – although it does charge a £2/month fee.
If you always go overdrawn, our best buys include the First Direct* 1st Account, which has a permanent £250 0% overdraft, Nationwide's* FlexDirect account (no minimum monthly pay-in), which has a 0% arranged overdraft for the first 12 months and the Halifax* Reward account (no minimum monthly pay-in), which has a 0% overdraft for the first six months, though after that charges are huge.
See our Best Bank Accounts guide for full information on all the top deals, including how they are for customer service.
What's our view on the new scheme?
Martin Lewis, creator of MoneySavingExpert.com, says: "Far too many people whinge that their bank is a b*****d, but then do nothing about it. A whole swathe of the country still has the same bank account they set up as a child on the back of being given a piggy bank. Don't whinge, ditch and switch.
"While switching has actually been a relatively simple process for a while, the new seven-day switching guarantee should make it easier. The headlines have been about the fact they'll speed up transferring payments you make out – like standing orders and direct debits. Actually, the big impact is that for the first time, banks will auto-forward payments coming in to you via your old account. That should help.
"Even so, the truth of the matter is the new guarantee isn't going to be the great driver for change it's being touted as, once the publicity dies down after a week or two. People don't switch out of apathy, habit, a fear of change and thinking all banks are the same. It's not just the fluidity of the switching process.
"If we really want the sector to change, then the banks have to up their game and offer innovative accounts that make a real difference to people. We've started to see the challenger banks do this, with First Direct selling itself hard based on untouchable customer service, and Santander's 123 offering in-credit interest higher than the best savings accounts along with cashback on bills."
More key questions answered...
I've switched. Do I need to set up my direct debits or standing orders?
No. As explained above, your direct debits and standing orders will be transferred over for you on the seventh working day and redirected for 13 months.
The person or organisation trying to debit your old account will be notified of the new account information so they can update their records and ensure subsequent payments go straight to the new account rather than the old one.
I've switched. Do I need to let my employer know my new details?
When it comes to something as important as your salary you should notify your employer as soon as possible about your new account details.
However, payments going into your account will be redirected to your new account for up to 13 months from your switch date.
And the person or organisation that is trying to credit your old account will be notified of the new account information so they can update their records and make sure subsequent payments go straight to the new account rather than the old one.
Does the new system apply to all banks?
All of the UK's major current account providers are involved in the new switching guarantee.
The 33 banks and building societies taking part include Barclays, Halifax, HSBC, Lloyds Bank, NatWest, RBS Santander and TSB. See the Payments Council website for the full list.
Is this just about switching current accounts?
Yes, the new rules are just about switching current accounts – including basic bank accounts – not other banking or savings products, or mortgages.
Can I switch if I'm overdrawn?
Yes. What you'll need to do with your old overdraft will depend on whether your new bank or building society can provide facilities to help you pay off any overdraft, which will be subject to the new bank's normal lending criteria.
If your new bank can't help with your overdraft, you must make separate arrangements to repay your old bank or building society what you owe.
But there are no exact rules in place about switching when you're overdrawn, what happens will vary by provider.
Will switching affect my credit rating?
It can have an impact in the short term – especially if you're rejected, or you've tried to open a number of accounts in a short space of time – although for most, this shouldn't be an issue.
But if you're about to make a serious credit application, for example a mortgage, switch after that.
This is because applying for a new account requires a credit check for the overdraft, which leaves a footprint on your file, and the fact you've got a long relationship (providing it's good) is a positive. So switch, and this takes a little while to rebuild. See our Boost Your Credit Rating guide for more help.
This credit check will take place before the seven-day switching period.
Other than that, switching won't have any effect on your credit rating, providing you repay any outstanding overdrafts on your previous accounts, as required by your old bank or building society. If there are any problems with payments during the process, your new bank or building society will correct them and ensure your credit rating is not affected.
What if I change my mind about switching?
You can cancel your switch seven or more working days before your switch date. So in practice, if you pick the earliest possible switch date, you can only cancel the switch on the same day you arranged it. After that, only certain elements can be cancelled.
The Payments Council suggests that if you change your mind during the seven-day switching process, it's actually better to let the transfer happen, and then use the service to switch back to your original provider.
How did the previous switching process work?
Previously the switching process varied from bank to bank and could take between 18 and 30 working days.
After the switch date, payments either accidentally sent to or attempted to be taken from the old account were usually rejected and not processed.
There was also no guarantee in place in case something went wrong in the switching process.
The new scheme has come into force today following a report from the Independent Commission on Banking in September 2011, which recommended ways which could make the switching process easier.
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