The MoneySavingIdiot switches bank after 20 years – here are five things he learned
It's been a while, but I'm back with more tales of mending my MoneyWasting ways. If you're new to MoneySavingIdiot, here's how it works – as a writer at MoneySavingExpert I help people save money, yet I suck at practising what we preach. So I'm sharing my attempts to change that in the hope of encouraging other non-natural MoneySavers. Previously, I've tackled train delays, overseas travel, credit scores and reclaiming cash from old emails. This week: switching bank.
Telling people to switch bank accounts to get better service and grab switching bonuses, such as free cash, is one of the main things MSE does, yet it's not something I'd previously considered because a) it seemed like a hassle and b) I'm a lazy, lazy man. But then on logging into my online banking one day I received this message (this is a mock up of it by the way):
Given I'd opened my bank account just before going to university, this message made me feel older than the sun. It also made me think: "What have you done for me lately/in the last 20 years?" and spurred me into the kind of action for which I'm renowned by no one.
Given the trademark passivity of your common MoneySavingIdiot, I had to seize upon this rare fervour to tackle my personal finances. Unfortunately, I didn't put too much thought into what I was doing and inevitably made the process more arduous than it needed to be, but here's what I learned along the way...
1) Don't automatically go for the top perk
Like any normal person, I wanted maximum money for minimum effort, so headed straight to the top bank accounts with perks for switching in our Best Bank Accounts guide and started mulling over whether I wanted free cash or a pair of headphones the size of a smart car (just in case these would take your fancy, it's worth noting this particular switching offer is no longer on offer).
But I pretty much live out of my overdraft (probably one for another blog, that), so by switching to one of the top accounts for if you're overdrawn (which didn't include a perk) and getting a 0% overdraft for 12 months, I'd save myself around £30 a month – £360 in total – which will probably do me more good than having the latest in wireless audio engineering strapped to my head. Sadly.
But as well as saving me cash, the overdraft option will also give me breathing space to cut it down or (fingers crossed) pay the bleeder off by continuing my Money Makeover in other areas. If you're going to try this, just bear in mind you'll need to check what overdraft limit your new bank's prepared to offer you (though you can still switch if it's not as big as your existing one) – see Can I still switch if I'm overdrawn? for info from actual banking experts.
2) Don't forget there might be alternative routes to perks, eg, having a friend
As we've established, perks ain't everything. But like writing on your hand with a Biro or being asked for ID despite being noticeably over 18, they are nice. I clocked in Best Bank Accounts that if someone who was already with the bank I wanted to switch to referred me, we'd both get £100. Add that to the £360 I'd save over 12 months, and that's enough cheese to buy one hell of a pair of headphones. (Obvs I'm kidding, I'll put it towards paying off my overdraft. I think...)
So after conducting widespread research among my esteemed colleagues to find out who was already with that bank (asking MSE Sarah, who sits opposite me, if she had an account with it) I got a referral link. After two weeks of MSE Sarah asking me where her £100 was later, I applied to switch. And four weeks of MSE Sarah asking me where her £100 was after that, we each had £100 sitting in our respective accounts.
3) Don't panic about other products not switching with your account
If you switch bank using the Current Account Switch Service (CASS), this closes your old account and moves your money, direct debits, standing orders and what not across to your new one for you. But anything else you have with your old bank, such as savings accounts and credit cards, are generally separate products and so won't be affected by the switch – full info in Best Bank Accounts.
But being a MoneySavingIdiot, I didn't read that info, needlessly panicked that my meagre savings were about to disappear into bank switch oblivion, and so opened a top savings account in what might have been record time while babbling incoherently. Rather happily though, this resulted in a 900% increase in interest rate (nowhere near as good as it sounds, but save the pennies etc).
Why didn't I use the savings to pay off my overdraft, even though in our Cut Overdraft Costs guide MSE Helen specifically states "having overdrafts and savings isn't sensible"? Well, I didn't come to be a MoneySavingIdiot by consistently making logical choices...
4) Don't think you have to switch immediately
While CASS switches you from your old bank to your new one in seven working days, it doesn't have to be seven days from when you begin the switch – you can specify a later date. Given I didn't know what I was doing, and that for some reason I'd started the switch when I needed to get going to catch a train to go away for the weekend, that's what I opted for – my thinking being I could delay it by a week and check I'd not messed it up.
The one hiccup I encountered (that for once wasn't of my own doing) was that it wasn't really made clear during the initial switch how to specify the later date. Being as attentive as an agitated pigeon, I then forgot I was even supposed to do it and was left wondering a couple of weeks later why the switch still hadn't been completed, even though I'd been sent my new debit card, PIN and online banking card reader doodah.
A bit of poking about in the online options of my new bank soon revealed how to do it though (asking for help like an adult also works I hear) and seven days later it was sorted as promised. Just try to remember you've done it, so you're not alarmed when you get messages from your various providers thanking you for setting up new direct debits. (Did I mention CASS moves your direct debits, standing orders etc to your new bank for you? Well it does.)
5) Don't doubt how good it'll feel
It might have taken two decades, but in the end, half an hour on a Friday evening was all it took to start a process that'll save me £360 over the next year, netted me and a mate £100 each and inadvertently caused me to find a more profitable home for my savings. That's the kind of effort-reward ratio even I can handle.