What’s the deal with current account switches?
It can be hard to ignore the neverending banners, posters and TV ads that entice customers to switch their bank account to another provider. Let’s be honest: it all seems too good to be true! All you need to do is switch a current account over to an identical product, and you’ll be given a free cash incentive!
That cash bonus might sound ideal, especially in the run-up to Christmas. Maybe you need it to pay off an urgent bill or settle up an account elsewhere? If this is the case, perhaps a payday loan or a bad credit loan might suit you more?
If you are just looking forward to getting some extra cash in over the holiday season, that’s great! You might be wondering, though: “what’s the catch?”, and I don’t blame you. People generally don’t give away free money.
Different banks will have different requirements, but sadly, there is usually a catch. Not everyone will benefit from a referral or a switch incentive, which is why it’s so important to really read through the terms and conditions.
What is an account switch?
Before we look into some of the concerns that customers might have, it’s important to know what an account switch actually is.
An account switch is where you move the entirety of one bank account into another one, usually with a separate provider. The process involves moving every incoming and outgoing payment from the account (such as your income, earnings or direct debits) and can take anywhere between 5-28 days.
Let’s take a look at some common requirements and how they might catch you out:
When a bank tries to incentivise someone into switching their account over, it’s because they want their custom. This means that you can’t switch any old account – it has to be an active ‘primary’ current account.
Wouldn’t it be great if you could open a new account with Bank X and immediately switch it to Bank Y for that great cash bonus they offer? Unfortunately for us, banks have figured out that loophole already.
Different companies will have different definitions of ‘prime’ customers, but there is generally a minimum amount of direct debits that you’ll need to move over before you qualify for that free £100.
A bank account isn’t any good to a big bank unless there’s money regularly going into it! Look closely at the terms and conditions of the switch offer, and you’ll likely see that you have to have a monthly income of at least £750 to qualify.
Keeping the account open
A lot of people think that they can switch their account to a new provider, collect their ‘reward’ and immediately begin the process of switching again to another bank. Unfortunately, this won’t work.
It would be great if you could just keep moving your account around, picking up a cool £100 every time, but major banks will be able to reclaim the cash bonus they paid you if you close your account within a set period of time.
No other accounts
Switching incentives are targeted at new customers. Chances are, you’ll only be eligible for the payout if you don’t already have an account with that bank.
That doesn’t just apply to current accounts – in some cases, a forgotten-about savings account from years ago can disqualify you from receiving the cash.
Many banks state in their terms that you can’t have held an account with them ever before, or you must have not held any products with them for a significant length of time before you apply.
Where does the money come from?
A lot of new customers might be wary of receiving a bank-approved cash bonus, as they don’t necessarily know where the money comes from.
In most cases, it will simply be a payment directly from their own profits. In some cases, such as with a customer-owned building society, it will come directly from the ‘investments’ that other customers have made into their savings accounts.
It’s important to remember that you’re VERY unlikely to get the cash bonus instantly; most of these account switching incentives require you to have held your account for a set amount of time before you’ll be paid any bonus.
If you do need quick access to cash, why not have a look at the great products that LoanBird have on offer? All you need to do is fill out a quick application, and you could receive the payout on the same day.