With the rise in ‘new-fashioned’ banking, switching banks can be quite tempting. There are plenty of incentives out there – from interest rates and overdrafts, to cold hard cash. But should you do it? Let’s take a look at the advantages and disadvantages.
Advantages
Cash Incentives
Cash incentives are one of the best ways for banks to pull people in – they will often require you to perform a full switch (not just open an account). Once you’re switched over, you’ll receive a deposit straight into your account, or receive vouchers in the post.
There’s no limiting to how often you switch. If you want to do this annually to make use of the incentives, by all means! Often, you’ll receive half when you join and the other half when you stay, so make sure you’re banking with them long enough to get the full incentive.
Interest Rates
If you’ve been with your current bank since your parents first opened one for you, then you’re probably not making use of the available interest rates. It’s worth taking a look online to see if you can get a better interest rate than the one you currently have. Some accounts have a promotional period of a higher rate of interest, so you may also benefit from changing accounts regularly to make sure you’re making the most of what’s available.
Overdrafts
If you’re often overdrawn, you may be paying a great deal in fees. It’s a good idea to make sure that you’re with a bank with a low-cost overdraft. Much like with interest rates, you will often get a promotional period where your overdraft will cost you very little or nothing at all. Until you’re out of your overdraft, don’t focus on other incentives, as you may end up paying more in overdraft interest and fees than you gained from switching.
Customer Service
It’s usually unlikely that you’ll switch bank accounts simply due to bad customer service, but it does happen. Some banks are known to have exceptional customer service or phone waiting times, so it might be something you want to look into before switching.
Disadvantages
So, with all this to offer, why wouldn’t you switch banks? There are a couple of things which you might want to consider.
Credit Score
If you’ve ever applied for a form of credit, you might remember being asked how long you’ve been with your current bank. Being with a bank for a long time tends to make you more creditworthy, this can be for a couple of reasons.
First, if you’ve been with a bank for a while, you show signs of stability. This tends to mean you’re less likely to have problems with money and that you’re trusted by your bank. Lenders love stability. They like to know that you’ve lived in the same place for a while, kept the same job, and have used the same bank.
Secondly, if your bank is your oldest credit account, closing it could reduce your credit history. Lenders like to see a long-running credit history as proof that you’ve got a record of being trusted by other lenders.
If you otherwise have a solid credit report, you don’t need to worry about this – but if you have an upcoming application for credit, wait until afterward to perform a switch.
Time
The credit account switch service is known for taking only seven days, but this is only part of the story. Before you can apply for a switch, you often have to open an account, which could take a matter of weeks, once you’ve sent back the signed forms and received your card and PIN in the post. This doesn’t necessarily mean you shouldn’t do it, but don’t expect it to be as quick as seven days.
So, what are you waiting for? Start searching for a new bank today!
