The Perks of Switching Bank Accounts - podcast episode cover

The Perks of Switching Bank Accounts

Mar 28, 202414 minSeason 1Ep. 22
--:--
--:--
Listen in podcast apps:
Metacast
Spotify
Youtube
RSS

Episode description

Ever wondered about switching current accounts but couldn’t face the admin? Friend of the Show, Cash Chats podcaster and award-winning Be Clever With Your Cash blogger Andy Webb talk us through just how easy (and profitable) moving to a new bank can be – and why you might want to stay put too.

Andy and our host Kia Commodore cover moving bank accounts, having multiple accounts, compare traditional high street banks with online ones and ask if it’s really worth regularly switching accounts for the latest offers.

Switching’s easier than you think. So don’t let the admin get in the way when it might just make you… A Little Bit Richer!

You can play the podcast and find other useful content on Legal & General’s website:

https://www.legalandgeneral.com/podcasts/a-little-bit-richer

You can hear more from Andy on his podcast Cash Chats and online:: https://becleverwithyourcash.com/

Kia and her guests share their own personal thoughts and opinions in this podcast. These might be different from Legal & General’s take on things. They give financial guidance for a UK audience that’s relevant at the time of recording. It’s general best practice, not the kind of personalised advice you’d get from a financial adviser.

See omnystudio.com/listener for privacy information.

Transcript

Kia Commodore

Hey, this is Kia, and today I'm asking, are all bank accounts equal? What benefits and features can you get? A lot of us sign up with a bank and stick with them for life, but what's the cost of loyalty, and more importantly, can we get a little bit richer by switching allegiance? Welcome to another episode of A Little Bit Richer, brought to you by my friends at Legal &; General.

To help us figure all this out is a friend of the show, Andy Webb, host of the Cash Chats podcast and the man behind the award- winning Be Clever With Your Cash blog. Welcome back, Andy.

Andy Webb

Hey, Kia.

Kia Commodore

A lot of people open a bank account and stay with the company forever after, but they may be missing out. Some banks offer a cash bonus to switch, and a new account could offer extra features, a free overdraft facility, and other rewards. When is it time to switch bank accounts, and how easy is this process?

Andy Webb

I'd say now. Now's the time to switch. If you've got a current account and it doesn't do anything for you, there's no perks, there's no features, it's a frustrating online banking experience, there's no reason why you should stick with them. We'll talk about switching properly in a second, but I do want to say first of all is you don't have to switch to change bank. There's no limit to how many

current accounts you can have. I've lost count. It's my job, right? So obviously I have to kind of look at different account stuff. I've got like 14, 15 current accounts, and that's fine. It's not a problem. So you can open up extra accounts for some of these features, but there are reasons to switch and if you do want to

switch, it is really, really, really simple. So effectively, you open up that new current account that you want to go to, and then during the application process, near the end it says " Do you want to switch your bank?" And if you do, it will... Basically this thing called the current account switch in service, and this has a guarantee. So within seven working days they will move all the money that's in

your existing current account over to the new account. They will transfer the standing orders, the direct debits. They're going to come out. You don't have to go to your gas company or whoever it is and get them to change it. It's all done for you, really nice and simple, and so it's all done within seven working days. And if something goes wrong, and I've done this so many times, nothing's ever

gone wrong, but sometimes it could go wrong. If it does go wrong, then you would get compensation. It's important to say, when you do this, this is known as a full switch, that the old current account is closed down. So that doesn't mean you have your new account

details, new sort code, new debit card. The only thing that doesn't get transferred across basically is anything you've made a payment with with that long card number on that debit card. Those things you're going to have to go into again and put new card details in. Everything else, moved over in seven working days. And also, it doesn't stop there, because the old bank will forward on any

extra payments effectively, forever. Let's say, in a year's time, you've gone out for dinner with a mate, you've split the bill, but they haven't got the cash, they need to transfer it to you. They've got your old account details, it's fine. That will just almost straight away appear in your new account, so you don't have to worry

really about anything at all. That's a full switch. There is something called a partial switch which doesn't have that guarantee, but if you did want to keep the old account open, but you wanted to move the direct debits over or whatever it might be, you can do a partial switch. Not all banks will let you do that, but it's just worth knowing it does exist as well.

Kia Commodore

I'm glad you mentioned how easy it is to switch, because sometimes it can feel overwhelming. You're like, " Okay, I need to move things over and I've got to manually do this, that, and a third." But there is, like I said, the current account switch service, or CAS, that is there to do it, and that guarantee gives you peace of mind to know

that if anything goes wrong, you're completely covered. And a lot of people are under this idea that you can't have more than one or two, because maybe it's part of your credit score or... It doesn't really have an effect, does it?

Andy Webb

I think we're talking in a moment about there is a kind of an element you to be aware of your credit score when you do this, but ultimately, if you do it sensibly, I think there are advantages. And also sometimes banks have problems with the apps, and they go down for a day.

We don't like it, but sometimes it happens. If you've got more than one current account and you've got some money in those other current accounts, at least you can kind of get by, and you could still do stuff. So there there's lots of really good reasons to have more than one.

Kia Commodore

Exactly. I agree with you. So we won't get too specific because things can change very quickly, but there are some great rewards that you can get from switching, so let's go through a few of them together.

Andy Webb

Yeah. The big one where you absolutely have to switch and do a full switch to get it is the cash bonus. I made thousands of pounds doing this, and this is when the switching offers were around like a hundred quid and stuff. Now, the last couple of years, we've been seeing some of them going up to 200 quid if not beyond that, and that's basically a bribe. The new bank saying, " Hey, look, come over to us,

and we'll give you cash." And that is a really good reason. If you need some money, a really good reason to go ahead with a switch. Other reasons you might want to change your bank, and you might want to switch this or open up an additional account to get it. Again, there are so many. A lot of them offer little perks, so maybe free cinema tickets or free

Disney plus, things like that. Some of them might have linked savings accounts that you can only get if you have their current account, and those rates that have on those accounts often amongst the best ones out there. Oh, there's so much. I mean, you mentioned about overdrafts before. There aren't many of these, but some of them will give you a naught percent overdraft over a small buffer or for

a year. Again, that could be a really big help when it comes to debts. Another big reason to change your bank again is that the online banking and the app, some of these newer banks, and they're not even new anymore, they've been going for such a long time, but the day- to- day banking, so much easier. From the ground up, they've been designed, these apps, to do that. So

again, a really good reason to change your bank. Again, there's so many more, but they're the kind of headline ones.

Kia Commodore

I think that's great. There's so many rewards out there that people just don't realize, but if you just made that switch, I mean obviously some people, they feel like they want stay one bank, fine, but if you do want to switch, like you said, you've made thousands. That's good. It sounds like a little side hustle. You've got us a little side hustle hack there. You can get free

cinema tickets, all those kind of things. It's really good to have a look at. But for anyone who's considering it, how can they compare between different accounts and to make that decision a lot easier for them?

Andy Webb

Yeah. I think you've really got to look at what's on offer and look at the bank's own site. They'll take you through those different features, those savings accounts, the rewards, whatever it might be. There are loads of videos and reviews that you can find online that will take

you through the pros and cons on becleverwithyourcash. com. Like anytime there's one of those switching deals pops up, I'm writing a full analysis of that and telling you what you need to do. Because some of these will have terms and conditions attached. It's not a simple case of

you just do this. If you want that free cash, they might want you to deposit a certain amount of money in a certain amount of time, or have a couple of direct debits that come out every single month, or you have to check the app once a month. Although for the switching deal or some of those ongoing

offers, some of them might have fees. Now if you do everything right, then the rewards you get will wipe out the fee, but you've got to do it right, otherwise you might end up costing you money. So be really careful, all that stuff. Do check all those terms and conditions. But you do all that, I think it's going to be a nice and simple kind of process for you.

Kia Commodore

Absolutely. I think the last time I did it, I switched over but one of those caveats was that I had to deposit, I can't remember how much the money was, but a certain amount of money for six months before I could get that money into my account, and I had to make it a real process to remember to put that money in every month. I set an alarm, put it in there, and I finally got that

reward. So it's just being aware. Reading that fine print, that's what you're getting into. It's not just you can get 200 pounds to switch in, but maybe you have two direct debits, put a certain amount like you said. It's just being aware of what there is.

Andy Webb

Yeah. And weigh up whether it's worth your time. I see some deals and I say to people that I personally wouldn't bother with it. They want it, they might do 20 transactions on your debit card every single month just to get two pounds. I'm like, " Actually, is it really worth your time?" And you might better off spending that time with some other kind of side hustle or just enjoying

your life. So you weigh these things up. Is it going to be worth the time you put into it? But overall, yeah, I mean you can have anything from just a couple of current accounts. We have a couple of rewards and features through to like you and I with quite a few.

Kia Commodore

Quite a few.

Andy Webb

There is admin with that.

Kia Commodore

Yes, there is.

Andy Webb

You've got to keep on top of it, but you can cycle money throughout the different accounts, all that kind of stuff. So it is definitely manageable, but maybe build up to that.

Kia Commodore

Build up to that. So let's go back to banks then. There's this debate that's always going on, and it's traditional banks. So when we say that we're talking about your typical brick- and- mortar banks, maybe like HSBC or Nationwide versus digital banks, which is like Monzo and Starling. What should people look out for to decide what's actually better

for them? So how can we know what's better, and what are the important things that we should look out for?

Andy Webb

Yeah. There's no right or wrong answer here. The digital banks have some of the best apps out there, and they are obviously great ways to do your everyday banking, but you don't have access to branches. A lot of people go, "Does that really matter how often?" When did you last go into your branch?

Kia Commodore

A few years ago.

Andy Webb

Yeah. And that's why we're seeing so many branches closing. So it might well be that the other banks, there isn't a branch on your high street anyway, but it's something to be aware of. If you do want branch access, then you want to prioritize a bank that does have one near you, at least for the time being. So that's a big thing there. And as I said before,

I would always have more than one account anyway. So if you have got a digital bank, I like to have a high street bank as well, one of the ones that has some of those features that we spoke about, just to kind of balance things out. There are a handful of digital banks that you need to be aware of because they're not fully licensed bank in the UK yet. They are applying for this license. They haven't got

it yet. And the key ones here, the time we're recording this, are Revolut and Monese. So they are ones which don't have the financial services compensation scheme protections amongst other things. Now, this is about where, if they were to go bust, any money held would be protected up to a massive 85,000 pounds. So just be aware of that, that there is a risk there.

Kia Commodore

Yeah, that is good to know. I think, like I said, having a hybrid, it is the best of both worlds. But it is hard. I don't think you can pick one that's better. I think that hybrid works nicely. So let me ask you then. We've spoken about the benefits of switching. There's a lot of rewards you

can get, and it sounds great. So is it worth regularly switching accounts to get the latest offers, or are there any downsides that we need to be aware of apart from obviously the admin that comes with it?

Andy Webb

Yeah, so a couple of things. Obviously, when you're doing the full switch, as we mentioned before, this does close your old current account, and sometimes you might have a linked product, maybe a savings account, maybe a credit card, you never know, that has all these great features and benefits, but they're only available to you if you have the current account. So just double check, if you haven't,

what's going to happen to that. It might be that it's closed down or you lose the rate or you have to start paying a fee or whatever it might be. So check that stuff first of all. But other than that, I think the big thing to think about here is the impact on your credit score, particularly if you're doing repeat switching.

Because every time you open up a new current account, the vast majority of the time, you're going to have a hard search appear on your credit report that will last for 12 months. It's going to stay on there. The more of these that you do, the bigger the

impact that's going to have on your credit report. Now, if you haven't got anything big coming up in the next year, you don't need to get a 0% percent transfer or purchase credit card, you don't have to do a remortgage or a first mortgage application, things like that, there's nothing major coming along and your credit score is relatively healthy, then in a year's time, that will drop off,

it's not going to be an issue. You can do a number of them, space it out every three months is an ideal way, and this is all your credit applications, not just bank accounts. But spread them out, just to reduce that kind of impact. But I know, I've done it myself, where I've done a number in a short space of time. You need to make that decision for your own personal situation. So that's important to know, just

spacing that out. But there is another impact that switching explicitly will have on your credit report, and that's because it's that closure again of that account, that existing account. Because if you've had that for two years, five years, 10 years, 20 years, whatever, we talked beginning about how maybe you had opened it and then you've still got it,

you've never done anything about it. That longevity, that kind of indication of loyalty, that is also a really good signal in your credit report. And when that account closes, you lose that, and the only way to build it back up...

Kia Commodore

Is to stay with another bank for a long time again.

Andy Webb

(inaudible) time. Yeah. So what I generally say to people, a little hack that I suggest to get around that, is to not close. Never switch that main account. Because you can open up what I call a dummy account. So it's just a separate current account. You open it up, and the only reason you're opening up this current account is you're going to use it to switch, to get that free cash,

right? Open it up, credit check most of the time for that, then open up the account you want to switch to to another credit check. So that's two credit checks in a short space of time, so just be aware of that. But you do the switch, you get your free money, and the old one's still there. That

loyalty is not gone. And then if you want to, that account you've switched to for the cash, well that could be another dummy account, and you can switch that one again, and again, and again. If you decide you get to an account you want to keep because of perks and benefits, well open up a different dummy account. So

yeah, look into that little bit more. It's simple, but some things you need to be aware of, but they're the big things to think about.

Kia Commodore

I love the fact that you mentioned dummy account, because that was something that my dad had told me a while back when I got into switching rewards and all of that. And like I said, I had my (inaudible) Bank that I'd been in for ages, and he said, " You know what, leave that." Like he said, " Leave it. The loyalty works in your favor, but open up a separate account you're not

really that fussed about, and then you can use that." And that's what I've been doing and it is a really, really good tip there. Keep in mind, the application's a short space of time, but it is a really good tip that you put out there. So before we wrap up, Andy, what are your top tips for listeners when thinking about their choice of bank account?

Andy Webb

So first of all, I would just remind everyone that you can have more than one current account. So as much as you feel you can manage, you can have all the different perks and features from a number of different accounts. If you're going to switch, set up that dummy account at least for that first switch so you don't lose that kind of loyalty that you've built up on your

credit report from that existing account. And then whether it's open up a new account for a perk or whether you're switching, just check those terms and conditions because you want this to be making you money or giving you a better banking experience. You don't want it to be costing you cash.

Kia Commodore

Absolutely. Thank you so much, Andy. As always, as a friend of the podcast, you come and grace us with so much knowledge and gems. Thank you so much. On the next episode of A Little Bit Richer, I'm going to be talking all about travel and how you can head on a holiday without breaking the bank. Don't forget, you can rate, review, and subscribe to the podcast so you never miss an episode. Tell your mates and help

them get a little bit richer too. Tell us what you think and get in touch via Legal &; General's Instagram and TikTok channels where you can see some behind- the- scenes and get exclusive tips from a range of our experts. A Little Bit Richer is brought to you by Legal &; General. Thank you for listening, and see you soon.

Transcript source: Provided by creator in RSS feed: download file
For the best experience, listen in Metacast app for iOS or Android
Open in Metacast