How switching your bank account could earn you up to £220
New research suggests staying put is costing British savers billions in missed interest every year.
**Switching Banks Could Net You Up to £220**
Many individuals remain with the same bank for extended periods, potentially forfeiting hundreds of pounds offered by rival institutions to attract new customers. Whether due to loyalty, inertia, or apprehension about the process, banks are actively competing to encourage account transfers. Currently, over five banks are providing incentives for switching, with the most substantial bonus reaching £220. Furthermore, those with savings could benefit from improved interest rates, leading to a greater return on their capital.
New research from Hargreaves Lansdown indicates that nearly two-thirds of British savers have maintained their banking relationship for over a decade. A survey conducted in August among 3,000 British adults revealed that 34% had moved their funds within the past 12 months. Based on an analysis of Financial Conduct Authority data, Hargreaves Lansdown estimates that remaining with the same bank costs British savers approximately £12 billion annually in missed interest.
Simon Belsham, Hargreaves Lansdown's chief client officer, notes that while inaction may seem convenient, it "often leads to poor returns." He states, "Millions leave their cash with the same bank by default and that inertia is worth a fortune to banks, while costing British savers billions of pounds a year. Savers clearly care about rates: when they move their money, the overwhelming reason is to secure a better return. What holds them back is the effort of repeatedly finding, opening and juggling different accounts."
**How to Change Bank, Energy, or Broadband Provider and Save Money**
Sarah Coles, head of personal finance at AJ Bell, explains that people exhibit "incredibly loyal" behavior towards their banks, necessitating competitors to offer incentives. She adds, "It's worth it for the banks, because they then have a captive audience, who are more likely to take other products from them." Coles advises that while the bonus is a "cherry on top," individuals should also consider factors such as the bank's service reputation, overdraft fees, and savings rates. Many offers are contingent on conditions like a minimum initial deposit or a specific number of direct debits.
Switching banks will appear on your credit report, which lenders review when determining mortgage eligibility. Opening numerous accounts in quick succession could negatively impact your credit score, though closing an old account might improve it. Coles suggests, "If you're planning to apply for a loan or mortgage in the next 12 months, you may want to wait until the deal is done."
Should you decide to switch, the free Current Account Switch Service (CASS), supported by over 50 UK banks and building societies, eliminates the need to manually transfer every direct debit or bill payment. You inform your new bank of your chosen switch date (allowing seven working days) and your old account details. Behind the scenes, the service will transfer payments, move your balance, and redirect incoming funds like benefits or salaries. Your old account will then be closed. In the event of any issues, you will be reimbursed for any interest and charges incurred on either your old or new account. However, recurring card payments, such as subscriptions, will need to be transferred manually. It is also advisable to download old bank statements before switching, as they will no longer be accessible after the move.