Most individuals use the same bank for decades, if not for their lifetime. Many small businesses are the same and stick with their high street bank even if they are missing out on far higher interest rates and lower bank charges which are available elsewhere.
Switching bank accounts is still perceived by many as being a difficult thing to do, but it is now a simpler process than ever.
What your bank must do if you want to switch your business bank account
As per the terms of the Business Banking Code (Section 7 – PDF), your current bank and your new bank have a number of obligations to you when you switch business bank accounts:
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Your current bank must let your new bank know about your standing orders and direct debits within 3 working days of receiving this request.
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Your current account must also be closed without any unnecessary delay.
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Your current bank must not make any extra charges for closing your account.
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If asked by you, your current bank should pass on your credit history to your new bank.
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Your new bank must tell you how the account transfer process will work, including what information your old bank will send, what features your new bank account will have (so you can easily compare with other accounts), and how long the transfer is likely to take.
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Your new bank account must be ready to use within 10 working days of your application being approved
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Any bank charges which have been made as a result of a delay in transferring banks, must be cancelled without delay.
Should you switch your business bank account?
Although the process of switching bank accounts has been simplified in recent years, you should think carefully before making the change.
The benefits of switching may include: access to higher interest rates, lower bank charges and extra business services. Don’t be tempted by short-term “introductory banking offers” if at the end of the promotional term, you are no better off than you were with your previous bank.
On the flip-side: switching banks may involve a great deal of administration for your company if you deal with a large number of transactions, it may also affect the perceived financial stability of your company as suppliers of credit often ask how long you have been with your bank.
Tips to help you switch bank accounts smoothly
- Compare business bank accounts before making the move. Make sure you find out what interest rates will apply after any introductory period is over.
- If possible, keep your old and new accounts running concurrently until you’re sure that all standing orders, direct debits and other regular transfers have been applied to the new account correctly.
- Many companies have several business accounts. You may have a competitive current account with one bank and a savings account with a different bank. Compare carefully, as you could be missing out on hundreds or thousands of pounds each year in lost interest.
- Hopefully, your account switch will go ahead smoothly and in reasonable time. If you do have problems and have been unable to resolve any issues with your current (or new) bank account provider, you can contact the Financial Ombudsman Service here.
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