Launched by the banking industry last September, the service ensures that existing payments such as direct debits or standing orders will be moved to the new account automatically, and any transactions which do go through to the old account will be redirected to the new one for 13 months, avoiding the problem of any payments going missing. The company making or taking the payment using the old account details will also get a message instructing them to update their records with the new account information. On top of that, the service is backed by a guarantee which means that if something should go wrong during a switch, any charges or interest will be refunded.
Until the service was brought in, changing from one account to another could be a lengthy process, with the switch typically taking between 18 and 30 days after the new account had been opened. That was a huge hurdle for small businesses heavily reliant on cash flow, with worries about missing out on invoice payments landing in the right account or suppliers not being paid according to terms, with the possibility of late payment charges being incurred.
But that timeline’s been reduced right down to seven working days from the day the switching process starts to when the switch takes place.
One of the drivers behind the Current Account Switch Service has been to increase competition between banking providers, and make it much easier for small businesses to vote with their feet when it comes to picking the account which works best for them.
So, is it time for you to look at whether you’re getting a good deal with your business banking? Here are the things you should consider:
Do I need a business bank account at all?
If your business is either a limited or incorporated company you must have a business account. If you are a sole trader or partnership, you could use your personal current account but that can make your finances messy – keeping personal and business accounts separate is the better option.
Am I spending too much on bank charges?
Some banks charge a fee for business banking services, and some don’t. Other costs are transaction-based, like fees for cash withdrawals, cheques, Bacs transfers and overseas payments. Think about exactly what you need to use and check the charges for each service. Some providers offer free banking, either for a set time or with limits on the number of transactions over a month – look at the penalties for going over those limits, and charges which kick in when the free banking period ends.
What if I need an overdraft?
Costs can be quite high but will vary between banks – check interest rates, set up fees and the amount you can borrow this way.
And what about a business debit card?
Lots of business accounts come with these facilities but ask if you’re eligible for a debit card – and a cheque book, if you need one – before changing to an account where you might not qualify for these.
What if I’m not happy with the service at my new bank?
With the new Current Account Switch Service, you can change your provider again quickly and easily.
Will switching bank accounts affect my business credit rating?
No, as long as you repay any outstanding overdraft with your old bank or building society. If there are any problems with payments as part of the switching process, your new bank or building society will put those right and make sure your credit rating is not affected.