Switch to a better bank account

What would it take to make you switch your current account? A better deal elsewhere? Incentives? A massive technical glitch preventing you from sending or receiving money for the better part of a week?

NatWest’s 7.5million customers have probably never thought as much about their current account provider as they did when its system update went awry, leaving them unable to see their balances or transfer cash in and out of their accounts.

The cost of reimbursing its customers for charges relating to the malfunction is likely to run into the millions – but it could cost NatWest much more if unhappy customers vote with their feet and take their business elsewhere.

Whoever you bank with, you could get a better deal by switching to a different provider for your current account. But just how easy is it to switch, and what kinds of deals are out there?

Here’s what you need to know about switching to a better bank account.

How easy is switching?

Your bank will arrange to transfer your cash, standing orders and direct debits for you, so switching current accounts involves less effort on your part than you might think.

You’ll just need to make sure anyone who pays into your account, such as your employer, has your new account details.

The entire switching process can take up to a month, but your balance can be transferred over on the same day via BACS. Your old bank must transfer all direct debits and standing orders to your new bank within three working days.

Depending on when you switch, there’s a chance a direct debit could go out of the new account before you salary goes in – but most banks will set up a free overdraft facility or waive any charges should this happen during the transition period.

If you’re always overdrawn

The straight-forward Santander Everyday Current Account is offering a 0% overdraft facility for four months if you switch and comes with no monthly fee. After the 0% period ends, its arranged overdraft charges £1 per day, capped at £20 a month.

Santander's 123 Current Account also offers 0% on your overdraft for four months with a minimum operating balance of £500. After this time the overdraft facility will cost you £1 per day, capped at 20 days in each monthly statement period.

But if you’re always overdrawn, an account with just an introductory 0% overdraft might not be much good for you.

Of the biggest six banks and building societies, Nationwide’s FlexAccount is on one of the best choices if you’re always overdrawn – by either £500 or £1,000. For example its 18.90% authorised overdraft rate would cost £7.80 if you were overdrawn by £500 for 30 days, or £15.54 if you were overdrawn by £1,000 for the same period.

If you’re always in credit

Customers who never venture into their current account’s overdraft may be able to benefit by switching to Santander's 123 Current Account, which pays up to 3% cashback on in-credit balances.

The 123 Account pays 1% cashback on water and council tax bills, 2% on gas and electricity bills and 3% on mobile, landline, broadband and TV subscription packages. What’s more, you’ll earn 1% AER (variable) once your balance is £1,000 or more, 2% when it’s £2,000 or more and 3% when it’s between £3,000 and £20,000.

To open the account, you’ll have to pay a monthly fee of £2, deposit at least £500 a month and set up at two direct debits. Its arranged overdraft will cost you £1 per day (capped at 20 days) in each monthly statement period.

Alternatively, the Halifax Reward Current Account will literally reward you with £5 a month for depositing £1,000 a month, whether you’re in credit or overdrawn. At the moment you can also get £100 cashback if you switch using Halifax’s switching service.

Other factors look out for

Some accounts require that you pay in a minimum amount each month, but if you’re paying your salary into the account on a monthly basis this probably won’t be a concern. You must pay at least £1,500 into the First Direct 1st Account each month for example (or hold another product such as a mortgage or savings account with the bank) or else you’ll be charged a monthly fee of £10.

It’s easy to be swayed by cash incentives, but make sure you look at other factors too like overdraft fees and charges before making a decision. And think about how you can access your account. If you currently use online banking, you’ll need an account which also offers this.

Also notice that while some accounts charge a monthly fee, you’ll get some extras in return. For example, the Halifax Ultimate Reward Current Account costs £10 a month (or £15 if you pay in less than £1,000 each month) but in return you’ll get worldwide multi-trip family travel insurance,  AA Breakdown cover, mobile phone insurance, home emergency cover and card protection.

Also be aware that although you might have to pay for your current account, you may get something in return. For example, Barclays has replaced all its packaged accounts with a single one which can be customised with optional, paid-for 'packs'.

At £6 a month for the Home Pack, you'll get cover for your satellite and TV equipment, extended warranty on domestic appliances, a troubleshooting service for your PC, a concierge service and a legal and tax helpline.

At £8.50 a month, the Travel Pack offers RAC roadside and At Home assistance, European family travel insurance and card protection.

Wisdom of crowds

Perhaps more importantly, check out how the bank scores in reviews or harness the wisdom of crowds and see what customers are saying about it.

For example, First Direct won MoneySupermarket’s overall provider of the year Supers award in 2011 and regularly scores well for service. Try searching Twitter to see what people are saying about First Direct.

The Co-operative Bank won the 2011 Supers for best current account provider and Nationwide has also scored well. 

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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