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Switching bank accounts - how to find the best current account deals

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Choices: The likes of Co-op and Nationwide offer a sizeable alternative to the biggest High Street names, meanwhile smaller banks and building societies have lots to offer

Consumers have had a lot to complain about when it comes to their banks in recent years.

Slipping customer service standards mean that a fifth of all complaints are never resolved.

Add to that the mistrust that has arisen from the mis-selling scandal and it is clear why people are looking to ditch and switch.

The good news is that changing banks is a far easier process than it used to be, and new rules mean it is set to get even easier in the second half of the year.

You can pick a bank that will pay better rates of interest and top service and it should do most of the switching work for you. Some will even give you free money.

You can also decide to fight back against the stranglehold of big banking by picking a building society or smaller player.

Thinking of switching to a better bank? Follow our step-by-step guide.

The rules

Banks and building societies must follow strict guidelines that make switching your bank account as quick as possible. Your old bank has three working days to pass information to your new bank. This includes details of all your direct debits and standing orders along with your credit history.

Your new bank has 10 working days to open an account for you once your application has been approved.

The history

Previously, switching was delayed by direct debit/standing order originators (gas and electricity companies, credit card companies etc) dragging their heels in passing on information. In the past, it took about eight weeks.

But that's only if you decide to move all of your direct debits yourself. A much more efficient way to switch is to use a bank's switching service. Most good providers offer this now. The service will take care of switching over all your direct debits when you open a new account with them.

How to do it

Most people switch accounts to earn more interest. Better service comes a close second. While inertia is still a massive hurdle, moving accounts can prove worthwhile and it shouldn't take you longer than 10 minutes to fill in the relevant forms.

ADVICE & TIPS

This is Money is packed with advice on switching bank accounts and finding the best deals. See our special Saving & banking section.

Generally you go to your new bank and ask to switch accounts telling them the name of your old bank and providing your account details. You'll have to provide two forms of identification - one to prove you are who you say you are, the other to prove where you live.

At most banks you need to fill in two forms - an application form and a transfer form. After that the entire switch is automated by the bank.

Check that your new bank will offer an interest-free 'switcher' overdraft which covers direct debits and standing orders that go through before money is paid into the new account.

In short, the typically three-step process is:

1) You fill in an application form and a transfer form and provide some proof of identity.

2) The new provider checks which payments you want moved across and sets them all up, while getting your previous account provider to cancel the old ones.

3) Your account will be set up and if you want your balance transferred and old account closed this will be done.

Picking a new bankAlways shop around for the best rates of interest. Plus look out for high charges on overdrafts and other services.

Some accounts throw in extra freebies, such as breakdown cover on your car or free travel insurance. There may be a catch on these, such as a monthly charge or you must pay in a minimum amount.

Ditch the big banksIf you are angered by the attitude and behaviour of big banks, or feel that they wield far too much power, then perhaps you should consider a smaller player or building society.

While many of us bank with members of the Big Four: Halifax/Lloyds, RBS/NatWest, Barclays, HSBC, there is a huge amount of choice beyond this.

Big building societies such as Nationwide, Yorkshire BS, or Coventry BS, may be feel like banks in their size and scope, but they are ultimately owned by members, are answerable to them and are not attached to casino banking investment arms.

The Co-op Bank is owned by the wider member-owned Co-op Group and has a pledge to act ethically.

Smaller local building societies may not offer the best rates all the time - although some often do - but they will give you a personal service.

Meanwhile, accounts from smaller banks such as Metro and Handelsbanken can offer a more personal service, while Secure Trust charges for accounts and even 50p for cash withdrawals with its basic current account, but will not let you go overdrawn and run up big bank charges.

Free moneyThose switching banks can take advantage of the incentives offered to them to switch.

Halifax will give £100 to customers switching to its Current Account, Reward Current Account or Ultimate Reward Current Account by 7 July. This account also pays customers £5 per month if they pay in at least £1,000 a month. [This is Money reviews the offer here]

First Direct, which regularly tops customer service polls, will give new customers £100 if they switch, but they need to pay in at least £1,000 per month in salary or income within three months of switching through its Easyswitch service. It will also give customers who switch £100 if they are unhappy with the bank and decide to switch away again after six months of paying in £1,000 per month.

Other innovative offersThree other big names also have something a bit different to offer: Nationwide gives customers free annual European multi-trip travel insurance with its FlexAccount. Its also worth checking out the bank's FlexDirect account which offers you 5 per cent interest on balances up to £2,500.

Barclays has launched bolt-on packages that let customers decide what extras they would like to add. Read a review of it by Moneysupermarket.

Santander's 123 account charges £2 per month but pays cashback of 1 per cent on water and council tax bills, 2 per cent on gas and electricity bills and 3 per cent on communications bills (landline, mobile, broadband, TV etc). It then also pays interest on balances of 1 per cent on balances above £1,000, 2 per cent above £2,000 and 3 per cent above £3,000.

›› See today's best deals: Current account comparison tool

How long will it take?

Although things are set to change in the second half of the year, for the next few months the following guidelines will still apply.

Banking industry guidelines require your new account to be operational within ten working days of your application being approved.

It's best to allow between 20 and 30 days for everything to be completed, but it can happen much quicker.

Banking watchdog - The FCA (previously the FSA) - says you are within your rights to demand a chase-up if it's not. On the timings, it says: 'Once your application for a new account is approved, if you wish to transfer direct debits and standing orders to the new bank account, your new bank should ask your old bank for details of them within three working days.'

'Your old bank should then give your new bank this information within three working days from receiving the request. The banks will agree a date to transfer the balance – but should not charge you for making the transfer.

'Your new account should be ready for use within ten working days of your application being approved.'

The future: Switching to get quicker and easier

Switching bank accounts will become quicker and simpler from September under new recommendations.

The industry is teaming up with the Government and is investing £750 million in a new account switching service.

Banks will be given a time limit of seven days to switch a customer's current account and must transfer direct debits and standing orders 'seamlessly'. Any inconvenience will be compensated and direct debits and standing orders will be tracked for 13 months to make sure nothing goes astray.

It's part of a groundbreaking report from the Independent Commission on Banking which has called on the Government to force banks to sign up to a new current account 'redirection service'.

It wants the Government to make sure the new service, which will be free to customers, is up and running by September 2013.

It is hoped that as it becomes easier to switch, competition amongst the banks will increase, meaning more and better choice for banks.

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