Are you better off switching banks? Or should you stay loyal?

James Rowe: The current account switch service becomes a teenager next month. It's been 13 years since it became possible to switch a current account in as little as seven days. But is it always worth it? And could the incentives grow even bigger? Welcome to Which Money?

Hello, it's James in the Which? studio. Alongside are Money News Editor Grace Witherden. Grace, hello!

Grace Witherden: Hi!

James Rowe: And for the first time on the podcast, personal finance analyst from Moneyfacts, Caitlyn Eastell.

Caitlyn Eastell: Hello, thank you for having me.

James Rowe: Now, bank account switching is what we're talking about today. It's something around 100,000 people do each month. Grace, do you want to just take us through the basics? Clearly, a lot of people do it, but for those who don't or who never have, do you want to just take us through the basics of it?

Grace Witherden: So, you mentioned the Current Account Switch Service, or as in short, we call it CASS. And that enables you to transfer your bank account from one provider to another within seven working days. And it just means that you don't have to worry about changing all these direct debits, changing where your salary goes into. It's just a seamless switch that actually makes switching your bank account really easy. And lots of banks will even pay you to switch – up to £220 right now. So, not only can you get a new bank account, not have to worry about all the admin from switching, and you can get paid to do it.

James Rowe: Yeah, and it was the fact that the switching service was brought in in the first place was because not a lot of people were actually switching bank accounts. I was having a look at the government proposal of it a little bit earlier on, and their stats were saying that in 2013, so when it was brought in, 75% of people had never actually switched their bank account before. Now, I'm not suggesting that any of us are old enough to remember what it was like before the switching service came in, but Caitlyn, I don't know if you've managed to have a look and can you remind us about what it looked like beforehand? How difficult was it to switch your banking provider?

Caitlyn Eastell: Yeah, so kind of what Grace has slightly alluded to before, it was a lot of manual admin. You had to ring up each the bank provider you wanted to switch to, tell them you wanted to switch, and then also your existing one, tell them that you were moving, and you were responsible for moving all your direct debits and all the admin. And prior to CASS coming in, it took up to 30 days to move.

Grace Witherden: That's a long time. That's a whole month of your life, potentially.

Caitlyn Eastell: Exactly.

James Rowe: And it's just that, beforehand, it's just that uncertainty for that whole month, basically. Now, you just sit back and accept that it's going to take a week, and if there's something you need to do, you can just accept that you might just have to wait a couple of days. But a month? I mean...

Grace Witherden: Yeah, and now when you do it, you're probably getting a notification from the bank come up on your phone, your account's ready, it's switched. We're getting much more information than we would have got back then as well. Not only CASS, but also keeping more in tune with every step of the process.

James Rowe: And it has actively encouraged more people to take up switching. As I said, 100,000 people each month do it. And it has done exactly that. I mean, even anecdotally, I imagine this crops up in conversation for you two or in research that you do. You deal with financial news on a day-to-day basis. It has really changed the game, hasn't it, Caitlyn?

Caitlyn Eastell: It has definitely, indeed. You see, the incentives just keep going and growing. When it first came out in 2013, there was a £100 switch-in, there was also a £125 one. Even a couple of years ago, they were sitting around £75. So, the appetite there to draw in customers is there, and obviously, it's working, seeing as banks and building societies are bringing in thousands, or even tens of thousands.

James Rowe: And that's the big draw really for a lot of consumers, for a lot of bank customers, is that big headline incentive where a bank will say, "We'll give you" – I think did you say £220 is the highest one we see at the moment for a standard current account? That's the big draw. There's a lot of other things which we shall touch on, but the monetary draw, that's the big one for customers, isn't it?

Grace Witherden: Yeah, that's why I switched mine last year. There was no way I was missing out on that £200.

James Rowe: Was that the first time you'd done it, or have you...

Grace Witherden: So, yeah, I'd done it a couple of years back, but not whilst I'd been at Which? so I hadn't really properly tracked the deals. And now part of my role is tracking all of the deals and making sure I let people know what the small print might be, and what they can get, and what's on offer with the account they're going to switch to.
And yeah, I really wanted to switch to one of our WRPs, one of our Which? Recommended Provider bank accounts, which is Nationwide. Not just for the switch incentive, but I'd missed out on the Fairer Share bonus that they do. They've done this for a couple of years now, where they've given £100 back to those with a Nationwide account if you meet certain conditions. And I was like, "There's no way I'm missing out on that again, so I'm going to get my £200 to switch." And this spring, I got my £100 bonus, so I'm £300 up really from switching to them. So, I wasn't going to let that go. But yeah, that was one of the main reasons I switched, so that just shows that the money definitely is one of the main incentives.

James Rowe: It is a big incentive. You're nodding along, Caitlyn. Have you done it before? I'm going to guess so. Am I wrong?

Caitlyn Eastell: I actually haven't. No, I've had the same bank account since high school, and I went with them purely because my parents bank there. So, I am probably needing to switch sometime soon.

James Rowe: You need to go with your own advice, don't you? It's funny because I was in a similar position as you until last year, where I think I'd had the same bank since, again, I was in high school. And I think it was just the ease of just having the same provider, not having to think about it, until I switched last year. And again, I saw, I think it was £175 that was being offered, and it was just that draw. And I thought, "You know what, I'll take the plunge." And let me tell you, yes, it was a lot easier than I thought it was going to be.

Grace Witherden: Yeah, so I didn't actually switch my main bank account, which we can come on to later.

James Rowe: I have a feeling I know what you're going to talk about there.
Grace Witherden: Yeah, I do have a number of accounts. So, I have also been with the same provider since I went to university, and I've been with that provider purely because of the student freebie they offered at the time, and I've stayed with them.

So, that does actually show how not lazy, but we just get very used to having one provider. And once our salary goes into there, we don't really think about moving, especially if we really like the app or, you know, I do actually quite like the app, and how easy it is to transfer money, any linked savings.

But I think it shows that you can still be a bit savvy because I've got a number of accounts now, and I've got one that I can keep switching. So, you can still take advantage of the deals and keep your main bank account if you don't want to take that leap into moving it.

James Rowe: I am going to come back to that because what you're suggesting there is maybe a little bit more complex than what we're talking about, but I will come back to it because I do find it quite fascinating.

Sticking with incentives though, should we just go through some very up-to-date numbers? I mean, these incentives from banks are changing day to day, week to week. But as we sit here in the studio this week at the end of August, let's talk through the incentives being offered by some of the providers. Do you want to have a game of tennis between the two of you and take us through them?

Grace Witherden: Yeah, sure. So, right now, the biggest bonus on offer is £220 from HSBC. So, this one does come with conditions. You'll have to pay £2,000 into the account, and you'll have to do some debit card spending, and you'll need at least two direct debits that move over with the account. So, you need to make sure that you've already got two active direct debits before you start that switch, and they will be moved as part of the switch.

James Rowe: And that's where we come to all these terms and conditions about there are some factors that you really need to hit around how much gets paid in or the direct debits and that sort of thing. But that's at the top end, isn't it? So, £220. Caitlyn, have you seen any more lately?

Caitlyn Eastell: Yeah, so not far off, we have some £200 ones: NatWest with £200, slightly different conditions, but along the same sort of lines. They need to pay in £1,250 into the account and log in to the mobile app within 60 days. And if they've switched to that account before, they might not be eligible for the current one.

James Rowe: I think what we see with some of the terms and conditions with these is they're not too tricky to get your head round. You know, they are pretty upfront with what these terms and conditions are. It's not as if they're going to bury them away. I think a lot of them on the websites and on the apps are quite descriptive about what these conditions are, aren't they?

Grace Witherden: Yeah, and sometimes they also have – not a quiz – but a process you can go through on their website where you can say, "Yes, I have had an account with you," "No, I haven't," "Yes, I have two active direct debits," "Yes, I have this much money that I'm going to pay in," and it will say whether you're eligible or not, which is helpful if you are a bit confused.

So, I've actually got a random switching deal if you want to hear it.

James Rowe: Yes, please.

Grace Witherden: So, if you switch to a Starling account, you can get a Suri electric toothbrush.

James Rowe: Right!

Grace Witherden: Yeah, I haven't seen an offer like this before.

James Rowe: So, not a monetary incentive?

Grace Witherden: Not a monetary offer. You can get a code, and with that code, you can get an electric toothbrush. Sadly, I did check and the toothbrush isn't a Which? Best Buy. So, I did check our toothbrush reviews earlier. But if you're in the market for a new electric toothbrush, you could get a new bank account and a toothbrush. And Starling is another one of our WRPs.

James Rowe: Yeah, I mean, if you've never heard of that before, I've certainly not heard of that before. Caitlyn, have you heard of incentives like that that isn't just money in your bank account?

Caitlyn Eastell: It's not often. I mean, there's similar sort of ones. So, HSBC have one at the moment where it's a non-cash incentive where you can get up to £600 on an Experience – that is for a premier account. So, it's not completely unheard of, but toothbrush is...

Grace Witherden: Yeah, so it's a bit unique, yeah.

James Rowe: Very different, very different. And on those monetary incentives, even in 2013, so when it was first introduced, there were a couple of banks who were already offering £125. So, even straight away, these big banks were ready and willing to give cash away just to get customers through the door.

Grace Witherden: Yeah, and to be honest, since I joined Which? at the end of 2021, I don't think a month's gone by where we haven't had a deal of some sort that we've been writing about. So, it shows that they are quite consistent. But it is worth thinking about that £200, or even £125 back then, that's nothing to a bank if they're going to potentially get your custom for the next 10 years. I mean, we've just said here how some of us haven't changed our bank account for maybe 10 years. So, even though you get that initial money to switch, but then that provider has you and they can maybe upsell you mortgages, credit cards, loans, savings. So, banks know that while some people will switch from offer to offer, plenty of people will then stay with them for years, so it's sort of a small price to pay for them, but it also makes people incentivised to move.

James Rowe: It's almost a bit of a marketing tool, isn't it, Caitlyn? Where that's the money they would have spent on adverts online or something, but instead, they just give you the cash, they get somebody in, and then, as Grace was saying, they can try and eke some more money out of you over the next few years.

Caitlyn Eastell: Yeah, I mean, it's definitely an incentive that works for people. Like you said, it's probably cheaper for them to offer out a couple of hundred to customers to try and bring them in in quick, short bursts, as opposed to advertising over however long, potentially months, years, however long.

But banks aren't offering incentives out of the kindness of their heart. We would wish! They do have their own margins to meet. As you say, they do need to bring in money to facilitate their lending and credit cards, loans, stuff like that. So, there's kind of an ulterior motive going on. But as you say, once if you invest in a customer once, they might forget to switch in a sense, and then you've got a customer for years, potentially.

Grace Witherden: Or then their children get sign up with the provider, too. And then they've got the whole family.

James Rowe: So, what we're saying, it is definitely well worth it for the banks to give out that couple of hundred quid and just bring in the custom. Do you think we could actually see those incentives get any higher? Because I was surprised in 2013 that the incentives were already £125. Some of them today aren't much more than £50 higher than that. Do you think we're just going to stick with incentives around that figure, or do you think there's going to be some banks that try and give us even more?

Grace Witherden: Yeah, I mean, the banks always try and top each other. We're already in an extremely competitive market. I mean, just the other week, the Co-operative Bank had a deal worth £300, and that included an initial bonus of £125, then you were getting £25 each month for three months provided you kept using the account. And if you were already a member of the Co-operative Bank or Coventry Building Society, who they took over, you're going to get an extra £100 paid in November. So, the overall amount of that deal was £300, and that was certainly – I don't know what the word would be – it got my eyes lifted when I opened the email. It raised my eyebrows when I read that email because, yeah, I hadn't seen one that high before.

But then that was also really clever because you got the initial bonus, but then to prove that you had to keep using the account, the £25 were staggered for three months, and then even then, you're not getting the £100 until November. And we've seen ones in the past where you might get like a set amount for six months or something, and then if you've proved that you've stayed, you'll get a further bonus. So, they might get higher, but they're also smart, where it's quite rare if something is eyebrow-raising that you're going to get all of that money upfront. It's usually going to be staggered.

James Rowe: It's very clever. They give you that big headline price and then drip-feed you the...

Grace Witherden: Yeah, and to make sure you're using the account, because they want you to be using it for a bit and then being like, "Ah, actually, I really like this account. Might stick with it. Really like the app, really like the cashback or something." So, yeah, it's rare you're going to get a huge amount upfront, I'd say.

James Rowe: And do we know which banks are successful at getting customers on board through, whether it is through incentives or just getting new customers through the door?

Grace Witherden: So, we do have data from how many people are using the Current Account Switch Service. So, the latest bank figures only cover January to March, and there was a clear winner. That was Nationwide, which gained 58,000 more customers.

James Rowe: Everyone wants a slice of that Fairer Share £100 quid, by the sounds of it!

Grace Witherden: Followed by Lloyds Bank, which was 24,000 net gain, and then Monzo, which had a 21,000 net gain. And Monzo is interesting because they rarely do switch offers. So, that just shows that actually it's not always money why people are switching. Monzo have a really good app, they're another WRP. They're a good challenger bank, and obviously, people are switching to them because they want that experience. You know, they don't have branches, so they're not going to suit everyone. But they don't need to offer that incentive to make people switch like some of the traditional high street ones.

And then do you want to hear the banks that lost the most customers during that period?

James Rowe: Absolutely! We've done top of the table, we might as well do bottom of the table.

Grace Witherden: So, yeah, Halifax lost around 21,000 customers, Barclays lost 20,000 customers, and NatWest lost 18,000 customers.

James Rowe: And Monzo is an interesting one that Grace mentioned about how they're getting so many new customers through the door – or to download the app at least anyway, because that's all you can do with Monzo. And there is very rarely a monetary incentive there. So, clearly, they're doing things very differently. People are finding out about Monzo and what they like about Monzo without having to offer people money as well. So, they're going about it in a very different way, aren't they?

Caitlyn Eastell: Yeah, for sure. And I think that probably goes to show the direction of where banking's going. We are seeing a lot more digital banks coming, kind of like we said earlier with Starling Bank. So, it begs the question, although incentives are probably a big part of it, is apps and digital experience part of the reason why people switch, and is that an incentive to people now?

James Rowe: Rather than the money, it's the other things. Is there anything else, Grace, you would say about why people might switch?

Grace Witherden: Yeah, because, Monzo, Starling, First Direct, they've all got fee-free spending abroad. That's now a huge thing. And I think a lot of the high street providers took a while to have that as a feature that you don't have to necessarily pay more for in a different account. So, lots of people have one of those challenger bank accounts because when they go on their holiday, they want to keep using their debit card and not have to pay fees, whereas the high street banks have been really slow on that. So, that's just one extra perk that you get, and that makes it worthwhile to me to keep one of those accounts open and not switch, so that I've got that option when I go away. So, there's like lots of other perks they can give you that actually make it worth keeping them and not switching away.

James Rowe: Grace, now let me come back to what you were teasing us before. I'm guessing you're talking about just a separate bank account entirely that you only use for switching?

Grace Witherden: Yeah, that's it! So, I will have my main account that my salary goes into, the mortgage payments come out of, the bills come out of. And then I have a number of separate accounts. A number of separate accounts that can be used for switching. There might also be a reason I keep another account open, i.e., fee-free spending abroad.
But you have to – so, this is what we call like savvy switches, like serial switchers. They're constantly looking for the next best deal. You know, Ruby, one of our money writers, I think she has like six or seven bank accounts. Really! And she wrote about that the other year, how she mixes and matches all of her banks for different perks. I don't have that many! But if there's a deal, she's probably done it.

So, yeah, you have to keep on top of it because because of what we talked about earlier about the terms and conditions you need to meet for each switch, it means that if I'm going to switch one of these accounts, I need two active direct debits coming out of that account, whereas most of my direct debits come out of my main account. There are ways around this though, because I was deep on the Reddit forums during my holiday last year, like, "How can I do this?"

So, one of them was I was able to set up a direct debit from this account that I was planning to switch from to my stocks and shares ISA. So, that's my own money going into one of my other accounts via a direct debit. So, that technically was one active direct debit, and now that just goes into my stocks and shares ISA every month.

And the other was I had been planning to do this anyway, so I'm really glad I did – and don't do this just to switch, do it if you want to do it – but I set up a charitable donation to Cats Protection because I adopted my cat last year from Cats Protection. So, I wanted to have a monthly donation to them, and I set that up via a direct debit. And then I had my two active direct debits. Once they were set up, I was able to then switch that account, get my new Nationwide account, get my switch money, and then get my Fairer Share bonus. And I wasn't using that other account, but I made sure I set up those direct debits first.

And then I had to meet the other conditions. So, I think I had to pay in £1,000, which was easy because you can just transfer it in, transfer it out. It doesn't need to necessarily stay there once you've done it. And I think that was what I needed to do for that one, and maybe log into the app or download the app, which I was going to do anyway. And then eventually, when I see another deal that I might like the look of, then I might think about switching another account. But I really like that Nationwide account, so I don't think I'm going to switch from that. That'll probably stay now. So, if I do want another switching deal, I'll have to use another account.

James Rowe: You're going to run out of banks soon!

Grace Witherden: I know, and this is the thing, because as Caitlyn was saying earlier, some of them won't pay if you've been a customer previously. So, you need to keep an eye out of if you've had one of them before.

James Rowe: And also, because sometimes it's not necessarily just the front-facing bit of the bank. You know, sometimes if you've had, let's say, an HSBC account before, you might not be able to get the incentive from First Direct because they're part of the same family.

Grace Witherden: Yeah, and Lloyds obviously owns Halifax, as we mentioned, and Bank of Scotland. NatWest is also Royal Bank of Scotland. So, yeah, you need to check. They will usually say, actually, usually they don't try and hide that. Like you said, it's not hidden away. But it does limit serial switchers to keep an eye on it.

James Rowe: As you say, this is some serious legwork you're doing to grab yourself a few extra hundred pounds every few months or however often you are going to switch. But to bring it back to the basics of it, Caitlyn, it is very straightforward for somebody who hasn't done it before or has been, like yourself, who's been with a certain provider for many years. It's very straightforward to do and to pocket that incentive as well if that's one of the draws.

Caitlyn Eastell: Yeah, definitely. But I think it's also important to, if it is going to be your main bank account, it's important to look beyond the main incentive. So, if you're someone who might need to use your overdraft, if you're switching from a bank account that has a really low arranged overdraft rate to one that's really high, that's not going to work for you. So, it's just important to make sure people are looking beyond the headlines and just thinking, "What am I going to miss out on with my existing account if I switch to a different one?"

James Rowe: And I guess for us all sitting here, for you, Caitlyn, at Moneyfacts, there's plenty of numbers and data and research about what good bank accounts look like, and for us here at Which? as well, Grace, there's loads of brilliant guidance and reviews and all that sort of thing as well to keep people on the right track. We'll pop some handy links in the show notes for you if you want to have a look at some reviews of some bank accounts.

But just to wrap up on kind of the counterpoint about why you shouldn't switch a bank account as well, again, I don't know, do you want to take it in turns between you? Caitlyn, do you want to kick us off?

Caitlyn Eastell: Sure. So, we've mentioned Nationwide a lot in this episode. Obviously, they reward their loyal customers, shareholders, so that's a big incentive for people to stay.

Grace Witherden: They also have a really good branch promise so they won't close bank branches.

James Rowe: Which a lot of banks are doing nowadays, aren't they?

Grace Witherden: Yeah, so that's huge. If that's really important to you to be able to go into a branch, they're really good for that. Others have done some pledges, but then also it's not going to suit you to switch to a challenger provider that doesn't have any branches.

James Rowe: What else? I'm just trying to go through my own head here. I guess, I think one of you mentioned this before, about just whether you actually like your current bank. You know, you might actually like the app or you might like the good levels of customer service. You shouldn't just drop that for £200 from a different bank, because you might drop that really good customer service that you like.

Grace Witherden: Yeah, and I think at one point – banks are a lot better at doing this now – but I think at one point, there was definitely one bank that my friends had, and every time we owed each other money, they had to whip out their card reader. And I was just like, "God, that is so ancient!" And it's just like there is no way I would have switched to that account if I was having to carry around this card reader. I want to just – and that's why Monzo was so good, you know, when it launched, because it was just like speedy, speedy. "You owe me this," you can send them a QR code, people can pay via that.

Banking has changed now, and you don't want to give up those really good features that a lot of them have now. So, yeah, there's no way I would be switching to a bank with an app that I don't find as easy to use, because I think that's really important for money management, to be able to know exactly where – lots of apps now even have, you can check your credit score via the app, it will give you a breakdown of all your spending and stuff.

Monzo has a really handy feature where it's like, "You don't have enough money for this direct debit tomorrow. Please put some more money in!" Which is such a simple thing, but it can catch you out if you only have the odd payment going out of there, to be like, "I need to put some money into that."

James Rowe: Yeah, especially if you're somebody who doesn't necessarily think of themselves as being financially savvy. Just those little reminders might be that big incentive to keep you with them.

Grace Witherden: Yeah, so there's things like that. And the other thing I would say is when you do open a new bank account, it can temporarily lower your credit score just because a lot of the accounts that we mentioned would have a linked overdraft. So, if you are preparing for a mortgage application – the reason I had waited until last year to switch is because I had had my mortgage, and I wasn't going to do that six months before that. And even now, I opened up another account, I think, five months ago, and even my credit report said to me the other day, "This won't appear on your thing in one month's time." But it shows that it does. So, if you have a big thing coming up, I wouldn't – I would kind of keep things as they are.

James Rowe: And one other thing, I guess, may not incentivise you to leave your current bank is perks as well. A lot more banks nowadays offer perks, whether for free or whether you pay a monthly fee for kind of like an upgraded bank account. A lot of banks are offering perks that you get every month. That might be a reason to stick with your current provider as well.

Caitlyn Eastell: Definitely. There's a handful off the top of my head, I think NatWest and RBS, include travel insurance and phone coverage insurance. So, if you are using that, then why – it wouldn't really make sense for someone to then move because of a switching offer and then have to take out a separate insurance, which could be more than the monthly fee they were paying. But also, on the other side of that, if you're going to switch and not use that incentive, then you're essentially overpaying for an account and for features that you're making no use of.

Grace Witherden: Yeah, because loads of the switch deals, quite often they are for the packaged accounts. So, like that Co-operative Bank one I mentioned, the £300 one, that was to open its Everyday Extra account, which is the account with the phone insurance, travel insurance, breakdown cover. Really good if you're going to use all those, but if you're not, that's still going to cost you money each month, even though you're going to have this payment. And you do tend to see a lot of switch offers for these packaged accounts that are going to cost you monthly.

James Rowe: So, that's a whole new can of worms, isn't it? You know, taking the money to move to a new bank account, but then you end up paying, let's say, a tenner a month, but then you don't actually use any of those perks. So, you'll soon eat into the maybe £200 incentive by paying £10 a month for perks you never actually use.

Grace Witherden: Yeah, and it always seems to be travel insurance, phone – it's usually mobile phone insurance and...

James Rowe: Free Greggs treat every week, or something like that.

Grace Witherden: Yeah, the Monzo one. Yeah, so there's lots of ones where you can get something, and sometimes, you know, if you don't really go abroad much, you might not need the annual travel policy. You know, it might be cheaper just to get like a £3 policy for a week. So, yeah, you need to see if you're actually going to make the most of those.

James Rowe: We are almost done, but Caitlyn, has this last half hour or so incentivised you to have a look and see if you're going to switch your own bank account?

Caitlyn Eastell: I mean, I'm definitely going to have to go back, have a proper look at what's going on.

James Rowe: And Grace, I imagine you're going to keep an eye out for any more incentives to see which other bank account you can switch your separate...

Grace Witherden: Yeah, as I said, I'm happy with my Nationwide that I switched to, but yeah, if a big deal came along, I'm sure I could be tempted to switch again. And I guess now I've done it quite recently, I know what to watch out for.

James Rowe: You're a pro!

Grace Witherden: Yeah!

James Rowe: As I say, we'll put plenty of useful links in the show notes if you've never done it before and you want to have a read about it, and have a look at some of our reviews as well for some banking providers. But for now, Grace, thanks very much.

Grace Witherden: Thank you.

James Rowe: And Caitlyn, thank you.

Caitlyn Eastell: Thank you for having me.

James Rowe: That brings to an end another podcast from Which? There's loads more for you to read about everything we discussed today – just head to the episode description for more useful everyday advice.

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