Why now is the time to switch current account

Bank customers will be bombarded with a new round of advertising this New Year designed to encourage them to switch current accounts.

The second wave of Current Account Switch Service advertising begins in January across TV, radio, newspapers and websites, explaining recent changes to the switching process and how it’s easier to move accounts than ever before.

So, if you’ve yet to make the move, why not make switching accounts one of your New Year resolutions?

Here, we explain how to do it, what the new switching rules mean, and which account could be the right choice for you…

Why switching has never been simpler

Previously, switching your current account could take anything from couple of weeks to as long as a month, but the introduction of 7-Day Switch rules last September have meant it will never take longer than seven working days – unless you specify you want it to.

Banks will arrange to transfer all your payments going out, and those coming in, so all the hard work is done for you.

There’s also a Guarantee, which means you won’t have to pay any charges or fees in the event that something goes wrong while the switch is taking place.

The Guarantee also means that, for 13 months after your agreed switch date, your new bank will arrange for any payments made into to your old account by mistake to be automatically redirected to your new one. It will also then get in touch with the sender and alert them to the new, correct account details.

Which current account?

The best current account for you will depend on exactly how you tend to manage your finances. For example, there’s no point going for an account with competitive overdraft charges but which pays no interest when you are in credit, if you tend to maintain a healthy bank balance.

Among the best current accounts for those who are in credit is Santander’s 123 current account. This pays 1% interest on balances of £1,000 or more, rising to 2% if you have £2,000 or more in your account. And balances of between £3,000 and £20,000 earn 3% interest – more than any easy access savings account pays.

You’ll also get the added bonus of 1% cashback of any Santander mortgage payments (up to £1,000 a month) that come out of your account, as well as on any water and council tax bills. This cashback increases to 2% of your energy bill spending, and 3% of your spending on mobile, home phone, broadband and paid-for TV packages.

To qualify for the 123 account, you’ll need to pay at least £500 a month into the account and set up two direct debits. The account has a £2 monthly fee.

Clydesdale Bank’s Current Account Direct is also well worth a look for anyone who wants to earn a competitive rate of interest when they are in credit. It pays 4% AER on balances between £1 up to £3,000, but you must agree to pay in £1,000 a month.

Alternatively, Halifax’s Reward account enables you to earn as much as £160 in the first year, made up of a £100 switching incentive and 12 monthly £5 reward payments. To qualify for this account, you must pay at least £750 a month into the account, pay out two direct debits and stay in credit each month.

Halifax also offers its recently launched Cashback Extras scheme which pays up to 15% cashback into your current account when you spend at a range of selected shops (including Homebase, Morrisons and Argos) using your Halifax debit or credit card. To qualify you need to sign up for online banking and register for the scheme.

If you’re often overdrawn

Don’t assume you can’t switch current accounts if you regularly dip into the red. Provided you can demonstrate you always stay within your agreed overdraft limit, most banks will be happy to consider your application to switch to them.

If you tend to be overdrawn by only a small amount each month, First Direct’s 1st Account offers a fee-free overdraft of £250. Anything over this will be charged at an annual percentage rate (APR) of 15.9%. You also get a £125 switching bonus when you move to this account.

First Direct is renowned for its excellent customer service, so this account is well worth considering if you aren’t happy with the way your current bank treats you. Bear in mind, however, that it doesn’t pay interest if you are in credit, although it does give you access to its Regular Saver account which pays a generous 6% AER provided you pay in between £25 and £300 a month.

Alternatively, Nationwide’s FlexDirect Current Account gives you a fee-free overdraft for the first 12 months. After that, you’ll pay 50p per day when you go overdrawn.

If you don’t want to pay a daily overdraft fee, then Clydesdale’s aforementioned Current Account Direct offers an overdraft rate of 9.9% EAR, making it a great option for occasional overdraft users.

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