Switching Bank Accounts: Pros and Cons Explained
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Change is always difficult. From home addresses to choice of grocery stores, we rarely ever think about change once we have settled in with an option. The longer the relationship with the chosen option, the harder it is to make the decision to change. It is, therefore, not surprising that many people still have the same bank accounts they have held since their teenage years.
The familiarity is often the main reason behind the reluctance to change bank accounts. You already know what to expect. So even when the bank adds new fees or now offers worse interest rates than the competition, you may not notice. Even when you do notice, you will be reluctant to commit to the change because you still believe that the bank is the best for you.
Is this really the case though?
If your financial needs have changed over the years, with the banks policies and fees altered extensively since the early days of your account, you choice may now be a poor one. If you analyze your bank’s present status and decide on switching to one of the many new current account providers, you still need to exercise caution to be certain that you are making the right decision. Switching bank accounts based on interest rates alone may not be a good idea depending on your peculiar situation. Here are the pros and cons of switching bank accounts.
Pros of switching bank accounts
- Most banks offer cash incentives for you to move your accounts to them. The cash amount could be up to £300. However, you need to keep your money for a minimum period of time, often a year. This is to avoid abuse of the incentives.
- A new account could mean getting better interest rates. Rates are generally low now but even a 0.5% increase in monthly rates could amount to tidy £6000 on a £100,000 account over a year!
- Lower bank charges on your new account, can also amount a significant amount of money over a period of time.
- Your new bank may have a more robust online banking platform which will increase the ease of access to your money and banking details.
- Do you dread going to your local branch to complain about something? Your new bank may also be better than your old bank in terms of customer service.
Cons of switching bank accounts
- Although the process has been largely automated, the process of switching bank accounts could be difficult, especially if your accounts are complex.
- Holding a bank account for years is a strong proof of creditworthiness. By moving to a new bank account, you could lose this leverage when it comes to application of loans.
- Switching bank accounts could also mean moving your credit card debt, mortgage loan and so on. This can involve a lot of confusing paper work.
In conclusion, switching bank accounts is never straightforward. If there are no tangible benefits to be derived from the switch, you may be better off sticking with your current provider.
Photo courtesy of: stevepb