Many people stick with the same account their parents opened for them when they were a child, but the 7-day Switch Guarantee changes all that. According to The Current Account Switch Service, more than 8 million current accounts have been switched since the service was introduced in 2013.
The 'big four' of Barclays, HSBC, Lloyds Banking Group and The Royal Bank of Scotland Group dominated the current account market for years. The Current Account Switch Guarantee was introduced by the government to not only make it simpler for consumers to switch current accounts, but also to increase competition between the banks. It's supposed to provide a simple, reliable and stress-free way to make that current account switch.
Competition had been lacking in the current account market. So now consumers have a wider choice, as the banks do their best to retain old customers while creating incentives for new ones.
Although not all the newest challenger banks are part of the easy switching process, many, such as Starling and Monzo, have signed up and won lots of news business, especially from banks that closed accounts, such as Tesco and M&S.
Depending on your needs and financial circumstances, there will be a number of different reasons you may choose to switch bank accounts.
Making the switch allows you to take advantage of the best interest rates, and rewards, or to access better or more appropriate services, such as online banking. It also enables customers facing the closure of their accounts to move easily. Tesco and M&S recently ceased offering bank accounts but other banks may choose to close individual, or groups of customers’, accounts.
In the past it might have been a complicated process to change bank accounts, but the process has become simple and worthwhile.
To encourage consumers to switch, banks offer many incentives encouraging people to consider their accounts, including competitive introductory interest rates.
The Current Account Switch Guarantee means your new bank will switch your payments and transfer your balance. Your old bank will then close your account for you. Any payments made will be automatically redirected. The Current Account Switch Service has redirected more than 120 million transactions.
This all should take place within 7 days, known as the 7-day switch.
Most current account providers, including all the banks owned by the big four, have signed up to the new switching system. The new challenger online only banks are not all immediately on board but many have signed up.
The Current Account Switch Service states that 47 banks and building societies are already part of the service.
When you go to open up a new current account with a bank that is part of the guarantee, you’ll just need your current bank details.
You’ll be asked to complete a Current Account Switch Agreement form – to begin life with your new current account – and a Current Account Closure Instruction form, to end relations with your old current account. It will all be handled by the bank you are switching to.
Finally, after confirming the switch date of your choosing, your new bank or building society will contact you to let you know that the process has begun, a minimum of 7 working days before the date agreed.
You can continue using your old current account right up until your switch date, so you won’t be stuck in limbo.
All of your incoming and outgoing payments will be moved to your new account, but if there are any issues, your bank or building society will get in touch.
Any money in your old account will also be transferred to the new current account.
Make sure to shop around to find the account that makes it worthwhile to switch. Our comparison table allow you to see the deals available and compare the options.
The service will take care of your payments going out – direct debits and standing orders – as well as payments going in, such as your salary.
If anything goes wrong with the switch that causes you to lose out on interest, your new bank or building society will refund you as soon as they’re informed of the error.
For added protection in the period of 36 months after the switch, your old current account provider will be obliged to arrange for any payments accidentally made to them to be automatically redirected to the new account.
Furthermore, the sender of the incorrect payment will be contacted and provided with your new account details.
It's free to use, and you can decide which date you want to switch
The banks or building society can look after all of your payments, such as, Direct Debits and standing orders
They can arrange for payments accidentally made to your old account to be redirected to your new one
Any money already in your existing account can be transferred to your new account
The switch can take place in two ways, a partial or a full switch:
Full switch: This version transfers your details and payments from the old account to your new one within seven working days. Your previous account will be closed.
Partial switch: This version involves transferring the information you require from your one account to the new account, but your original account doesn't close. You can decide, which direct debits and standing orders to keep. It's important to note that the '7-day switch' doesn't apply to this version of the switch.
It’s worth considering when thinking about making the change:
Recurring debit card payments, such as with online retailers, will remain the same, unless you amend them yourself as the actual card details will change
You can switch to a joint account, however, you can't switch from a joint account to a solo account
You can decide on your switch date, as long it has been selected seven days in advance
Switching accounts can affect your credit score, as your credit history is supported by having good banking history. So it's not encouraged to switch too often. If for example you're applying for a mortgage, it's not advised to switch accounts until after the application has been processed, to avoid impacting your credit score