The £240 bank switching offer and a mistake that could cost you

Major banks are currently offering up to £240 in free cash to customers willing to switch their current account, while some are also dangling savings rates of up to 8%.

And moving your banking is easier than ever, with the Current Account Switch Service transferring your balance, direct debits and standing orders and closing your old account within seven working days.

But experts warn that while switching can put hundreds of pounds in your pocket, there can be catches – and constantly jumping between banks could create problems if you are planning to apply for credit.

“Loyalty doesn’t pay, and firms rely on your inertia,” agrees Scott Dixon, an Edinburgh-based consumer rights champion known as The Complaints Resolver.

But switching should not be an automatic money-making exercise.

“Everybody wants a frictionless banking experience,” says Dixon. “But you need to ask yourself – is a new bank going to make life easier for me?”

Here’s what you need to know before ditching your current account.

Why are people so loyal to their bank?

“Often it’s not so much loyalty, but is more about ‘better the devil you know’,” says Dixon. “We all lead busy lives, and our bank account just ticks along in the background.”

Dixon admits he has fallen into the same trap.

“I’ve been with HSBC since 2009 but I know my branch manager, and if anything goes wrong, I can speak to somebody and get it sorted.

“However, since Covid was treated by banks as a once-in-a lifetime-opportunity to decimate the branch network, forcing everybody to go online, it’s created a multitude of problems for many people.”

How much could you get for switching?

The biggest attraction is often the upfront cash.

“The biggest benefit of switching is the cash bonus,” says Dixon. “NatWest are currently doing a £200 switch offer, but you can look for the best current deals on Uswitch or MoneySuperMarket.

“People should look at the headline perks and bonuses, and better interest rates, and cash-back and discounts, and customer service is also something to consider.”

Santander has now launched a £240 switching offer, putting it among the biggest free cash incentives currently available on a fee-free current account.

Rachel Springall, finance expert at Moneyfacts, said: “Santander’s new current account switching offer of £240 could be an enticing choice for customers who might need a financial boost after the summer holidays. It is one of the highest free cash payments available on a fee-free account, ideal for those who want a simple, straightforward account for their everyday banking.

“Customers will need to pay in at least £1,500 into the Everyday Current Account, set up two household direct debits and open the Regular Saver account that pays 8% AER, amongst other terms, to be eligible. Unlike some other regular savers on the market that revert to a flexible saver earning a much poorer return, Santander’s account will continue for another year, paying 3% AER.”

But Dixon warns consumers not to be dazzled by the headline figure.

“It’s easy to get seduced by offers – but make sure that you read the T&Cs to see if you’re eligible before applying and having that credit search logged on your credit file. Some restrictions include things like minimum monthly credits, like your salary or £1k-1.5k a month being paid into the account.”

Which banks are offering switching cash?

Current top free switching offers listed by Moneyfacts include:

• Santander – £240
• HSBC – £220
• NatWest and RBS – £200
• Nationwide Building Society – £175
• first direct – £175
• The Co-operative Bank – £125

Offers can change or be withdrawn, so check the eligibility rules before applying.

Springall said: “Switching cash offers can come and go throughout the year and can be pulled with little notice, yet customers must not feel rushed to switch.

“There is no real ‘one-size-fits-all’ current account, as many are tailored for different needs. Those that do offer an array of add-ons must be regularly assessed to ensure they are still offering value for money, otherwise consumers will waste their cash on the packaged account fee.”

How difficult is it to change banks?

The process has become much simpler.

The Current Account Switch Service moves your money, direct debits and standing orders across to your new account and closes your old account within seven working days.

“Moving bank accounts is very easy to do now,” says Dixon. “You get in touch with your new bank and they just do everything in one go.”

The service has also been operating for 13 years, making it far less of a headache than moving accounts once was.

Could switching too often hurt your credit score?

This is where the decision becomes more complicated.

Every time you apply for a financial product, a credit search may be recorded. If you are repeatedly applying for accounts and then need a mortgage, loan or car finance, multiple searches over a short period could potentially work against you.

Dixon explains: “There are two types of searches – a soft search (which is what Buy Now Pay Later has been doing until recently) and hard searches for products such as mortgages and car loans.

“The problem is you don’t know which one will be carried out. I would take the view that a hard search will be carried out and if you clock up too many searches in a short period of time, it can affect your credit score.”

Some people use ‘burner accounts’ to repeatedly collect switching bonuses.

But Dixon says: “It’s a lot of ‘faff’, and potentially could cost you time and money monitoring two different accounts with direct debits.”

What other perks could you get?

The cash bonus is only part of the attraction.

Some current accounts offer ongoing cashback on spending or household bills, retail vouchers, higher savings rates or packaged benefits such as travel insurance.

“One of the best perks is travel insurance,” says Dixon. “But you’ve got to treat it like a proper insurance policy. When it comes to making claims on bank account travel insurance, declaring pre-existing health conditions is a big problem and consumers are coming unstuck.”

Customer service can also make a difference.

Dixon says: “We’re increasingly looking for bank accounts that provide better service. Some banks are better than others – Nationwide, Monzo and First Direct are rated highly.”

Could you earn more interest on your savings?

Some current accounts and linked savings products are offering rates as high as 8%, but the headline rate does not necessarily mean you will earn 8% on a large lump sum for a whole year.

Dixon explains: “If you take out a savings account that sits side by side with the current account, that’s where you’ll find the higher savings interest rates.

“But you need to watch out for banks reducing the introductory interest rate after a length of time.”

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Some regular saver accounts also limit how much you can deposit each month, while the highest rate may only apply for a limited period.

Springall said Santander’s linked Regular Saver will pay 8% AER initially, before continuing for another year at 3% AER.

The message for anyone tempted by a switching deal is simple: look beyond the headline cash figure.

A £240 bonus can be worthwhile, but only if you meet the conditions, the account suits your needs and the wider benefits outweigh any fees or inconvenience.

As Springall puts it: “Switching current accounts is quick and easy to do through the Current Account Switch Service (CASS), which celebrates its 13th anniversary this month. The service moves over any balance and redirects standing orders and direct debits to the new account.”