With competition between banks increasing, many are offering financial rewards if you switch banks; but is it worth switching or is it best to stay loyal?
Many banks offer a cashback incentive to new customers; however as this is a one-off lump sum it has to be considered along with the other features of the account in order to determine if it is the best deal for you. Many accounts have a monthly fee, which can be as high as £18. This totals £216 in the first year alone, a sum that may be more than double the reward for switching. If you are frequently in your overdraft, even switching to a free account can cost you money if the overdraft fees or interest are higher than your original account. Similarly, if you frequently travel abroad the charges for using your card overseas may outweigh the benefits of switching.
By switching accounts, you may lose benefits that such as cashback on purchases or bills, which may lead to losing out on money in the long run, even when switching to a free account. Many banks reward loyalty by offering savings accounts with a higher interest rate to customers. Switching accounts may mean losing this higher rate, which with today’s low interest rates could cause savers to lose a substantial amount of interest.
Another way in which your loyalty to one bank is rewarded is by your credit rating. Changing accounts too often can suggest an unstable lifestyle, which may make you a financial risk. However, if you will be significantly better off by changing your account, do not let this hold you back. Your credit rating will build back up as your time with your new bank increases. If you are sure that switching will leave you better off, it is important that you read the terms and conditions on your new account. On many accounts the benefits are only available if you pay in a certain amount each month, or have a number of direct debits that are paid from the account.
Every account and every customer is different. In order to decide if switching accounts is worth it, you need to consider all the features of the account alongside your banking personality. Rather than being persuaded by one-off deals, carefully consider which account works best with your lifestyle to ensure that your bank is working for you.