Switching bank accounts may be easier than you think

Are you thinking of switching your day-to-day (transaction) account to another bank, building society or credit union?

If you are not satisfied with your current provider, it's getting easier to switch accounts.

Here are some tips that will save you time, money and possibly a lot of hassle.

Transaction accounts

The main account you use for your day-to-day banking is probably what the industry calls a transaction account. Most people just call it their 'bank account' but you may have a transaction account with a credit union or a building society. It's usually where your pay goes in and it's the first place you go when you want to:

• Draw out cash
• Transfer money to pay bills
• Pay for things with your ATM card
• Write personal cheques to pay for goods and services, and
• Make automatic payments or set up regular direct debits.

The main feature of these accounts is they offer easy access to your money. The trade off is that your money doesn't usually earn as much interest as it might in other types of account.

Tip If you've built up some extra savings in a transaction account that you don't need to use anytime soon - and don't need for emergencies - you might be better off moving it into an account that pays a higher rate of interest.

 

Would you be better off switching?

New transaction accounts come on to the market everyday. Are you interested in an account with lower fees, easier access, better service or a higher rate of interest? Why not shop around and see if there are other accounts that are better suited to your needs. It pays to weigh up the pros and cons - compare the fees and features of what you have now with other products on the market. If you find one that's better, then switching could be worth it.

You have decided to switch?what next?

Okay, so you've found a new account that offers more of what you want at the right price. It's important to make sure the switch goes smoothly. When you switch accounts, you will need to update your automatic payments. If the payments stop, you could find your power or phone getting cutting off or find that your house and contents are no longer insured.

There are two types of automatic payments:

• Direct debits - for example, payments for insurance policies or electricity bills, or regular payments off a personal loan or store credit card.
• Direct credits - for example, your pay, government benefit payments or tax refunds.

Ask your bank, building society or credit union for a list of your direct debits and direct credits for the last 13 months. All banks, building societies and credit unions will provide this service from November 2008, but some of them already offer it. It pays to double check old statements. Don't forget automatic payments between your transaction account and other accounts, such as an online savings account or credit card account.

The trickiest payments to remember are probably annual subscriptions or membership fees.

Opening your new transaction account

When you open your new account, you should give your new account provider your list of automatic payments for the past 13 months. If you ask them, they will help you re-establish those payments on the new account. Some financial institutions will help you by offering a switching package that generates letters you use to send out account details, and some will advise the companies of your changed account arrangements on your behalf. Ask your financial institution about this or check their website for details.

Safety net

It can pay to keep your old account open for a short time after you open your new one. This will make sure all your payments keep happening. Make sure you leave enough money in your old account. And bear in mind that you may be up for two sets of account keeping fees while both accounts are open.

If something goes wrong and an automatic payment bounces despite all your hard work, you could be asked to pay a fee of some sort, either by your account provider or by whoever the payment was going to. The hold up may be someone else's fault if, for example, the paperwork you provided was not processed on time. If this is the case, complain. You may be able to get the fee waived.

Next steps

If you'd like to read more about the types of accounts that are available and what to look for in an account, see Saving.

If you're shopping around for a better deal, there are other websites that offer more detailed information about transaction accounts and other products. See Cannex and Infochoice.

Whether you're interested in switching your transaction account, your home loan or any other financial product, the basic steps you'd take are the same. For more information about these simple steps, see Switching to save money. If you'd like to read more about switching your home loan, see Switching home loans.