A record number of people switched their bank account in the final few months of last year with 433,701 using the Current Account Switch Service (CASS) – This is the highest number of people since the service launched
Switching banks can offer a range of perks and has been platformed as being a good way to make some quick and easy cash – but when should you not switch?
A record number of people switched their bank account in the final few months of last year with 433,701 using the Current Account Switch Service (CASS) between October and December. This is the highest number of people since the service launched more than a decade ago.
Some of the main reasons Brits decided to make the switch, according to CASS, included cash incentives, promotional offers and mobile and online banking. More often than not, switching banks does give you a slew of new benefits but there are circumstances where switching wouldn’t be the best thing to do. Here we highlight four instances where it might be best to hold off switching.
You’re applying for a mortgage soon
If you are applying for a mortgage in the coming months then it’s the best idea to hold off switching your bank until after the deal is completed. This is because opening a new bank account can lower your credit score temporarily which could impact your mortgage deal.
Your score is temporarily lowered because a bank will conduct a “hard credit check” on your account during the switching application process. A hard credit check is conducted each time you submit a full application for credit including when you get a mortgage. So it is best to spread out your credit applications so your credit score doesn’t take a dramatic hit all at once.
Something worth doing if plan on applying for a mortgage – but far away enough so you could squeeze in a quick bank switch – is to download bank statements from your current bank account as they may be difficult to access once you have switched banks, and a lender may need them in the future.
If you do not plan on using premium perks
Some banks charge fees for certain accounts which offer premium perks, and they may offer a cash switching incentive to move over to one of these accounts. Some of these perks include cashback, travel insurance and lifestyle subscriptions. According to the consumer group Which? fees for some of these bank accounts could be as high as £21 a month.
However, if you are not going to use or take advantage of the elements offered with the specific account you have switched to then it would be a major waste of money to do so – even with the switching bonus.
You have overdraft debt
An overdraft is short-term credit that allows you to spend more than you have in your current account. If you are in your overdraft, it isn’t a barrier to switching but usually you will need to pay off your debt with your old bank.
If you have a record of managing your overdraft well, most banks will consider taking the existing overdraft on. So when you switch your existing overdraft debt will be sent from your old bank and you’ll owe the overdraft balance on the new account instead.
If the new provider won’t let you move your existing overdraft across, you can still switch but you will need to discuss a way of paying off your overdraft with your old bank. Some may agree to keep the old account open to help you pay it off gradually but others may insist you clear the debt before you switch. Due to the hurdles you may have to jump for switching, it may be best to work on paying your current debt off before deciding to switch your bank account
There are no bank branches close to you
If being able to go to a physical bank branch – either by walking or by a short drive – and talking in person to bank employees is important to you, it’s essential to have a branch nearby. So it will not be worth switching to a bank which does not have a branch close to you or switching to a challenger bank that how no brick and mortar sites. One in five switchers said that the reason they were moving banks was due to the location of branches according to CASS.
However, it is important to be aware that the number of physical bank branches on British high streets is rapidly declining with Which? reporting that 223 branches are earmarked for closure already this year. With physical bank branches closing, it may be an idea to look at which banks offer the best mobile and online baking support. Four in 10 said online or mobile banking was the top reason for switching last last year.