How to switch your business bank account
Changing banks used to be a long, drawn-out affair - not any longer.
Although changing your bank is still not as easy as changing the channel on your TV, requirements laid down by the government should make it just that bit simpler to move your account down the high street if you feel your bank isn’t up to scratch.
But why would you want to go through the hassle of changing banks in the first place? Well, research has shown that the majority of small businesses are not happy with the level of service and charges offered by their banks.
Action point: Need a loan to start a business of your own? See how we can help here and here
This is despite rules introduced at the start of 2003, which demanded that banks pay interest on business accounts and generally give entrepreneurs a better deal than the ‘join us and we’ll charge you for everything you want to do’ agreement that previously existed.
Maybe you have seen a loan at a better rate of interest at another bank, maybe they offer services such as internet banking and free transactions, or maybe you are just fed up with your current bank and want a change. Whatever your reason, don’t feel any misplaced loyalty towards your bank – look around to find the best deal for your business and make the switch.
What should I be looking for?
Almost all UK banks fall over themselves to stress how small business-friendly their accounts are, but it is vital that you spend the time comparing what’s offered by each bank, down to the nuts and bolts of charges and interest. Savings here will aid your company in the long-run.
“Business banking is becoming ever more competitive,” a spokesman for the British Banking Association (BBA) said. “Many banks have attractive offers for small business customer, particularly those just starting up.
“We would encourage people to shop around for the best deal – but be sure to compare like with like.”
When considering the merits of a new bank, make sure they don’t make the same failures as your current one. Of course, you cannot measure customer service until you actually sign up, but if you were irritated by, say, the poor internet banking of your old bank, it’s well worth checking out whether your new provider will do any better.
Things to consider when researching your new bank:
What rate of interest is paid and how does this compare with your current bank?
What overdraft limits will be set on your account? How much will you be charged for going into the red?
What loans are on offer? What does the small print say?
Do you get free access to your money from other banks’ cash machines?
Similarly, how much do transactions cost – some banks offer a set amount free each month, find out what deal your new bank provides.
How many branches are close to your business? What opening times do they have? Are they big enough to accommodate your needs?
If you are in a remote location, what agreements does your new bank have with other banks and Post Offices? You may be able to pay bills and withdraw and deposit cash without actually entering your own bank.
What schemes and agreements does the bank sign up to? Is it fully regulated by the financial ombudsman to assist you if you have a complaint?
What is the internet banking service like? Is it easy to access and can you transfer money and view your account hassle-free?
Will you be talking to a machine or listening to Elvis while continually on hold when you try to call your branch? Speaking to a human can speed up things considerably – try calling a potential new bank to find out how long you have to wait.
What does my new and old banks have to do for me? Under guidelines published by the Department of Trade and Industry (DTI) [now the Department for Business, Enterprise and Regulatory Reform — BERR] in October 2003, banks aren’t allowed to dawdle when closing down an account or opening up a new one. In a move designed to speed up the process for business account holders, banks now have a set period of time to close an account and to transfer all direct debits, standing orders and other arrangements to the new account. The targets, in force since 31 December 2003, outline the duties of both old and new banks. The old bank is required to:
|Forward new bank, and/or small firm as requested, details of small firm’s existing direct debits (DDs) and standing orders (SOs)||By the close of business on the second working day following the working day of receipt of the request.|
|Action request by new bank or by small firms to cancel DDs and SOs||By close of business on the second working day following following receipt of the request, or at a later date agreed by the small firm|
|Where applicable, action request by new bank or by small firm to transfer the available balance remaining in the account with it to new bank or to small business. If requested, close account.||By close of business on the third working day following the receipt of the request. An additional working day is applicable where the small firm or new bank has requested closure of the account.|
|Where applicable, on receipt of sufficient cleared funds from bew bank or small firm to clear balance of small firm’s overdraft (including interest and costs), level off small firm’s account and, if requested, close account.||Within three working days following the receipt of the funds from small firm or new bank. An additional working day is added if the account is to be closed.|
The new bank must:
|Following receipt of details of regular payments (DDs and SOs) set up, in accordance with any instructions from small firm, new DDs and SOs.||By close of business on the third working day following the working day of receipt of details of such regular payments or at a later date if specified by the small firm.|
|Where applicable and requested by small firm, send request to old bank to transfer to it the available balance remaining in the old account.||By close of business on the second working day after the working day of receipt or at a later date, if requested by the small firm.|
|Where applicable, and provided small firm has put new bank in a position to do so, action request to transfer to old bank funds, in accordance with small firm’s instructions, to clear balance of small firms’ overdraft, including interest and costs.||By close of business on the second working day following the working day of receipt of the request or at a later date if agreed by the small firm.|
It’s worth remembering, however, that the targets shift depend on whether you have a secured overdraft or not. Check with your bank over how your circumstances affect the targets.
In addition, most banks are signed up to the voluntary Business Banking Code, which dictates that the old bank must inform the new bank of standing orders and direct debits within three working days, provide a credit history and transfer an account in 10 working days.
The code also requires banks to cancel any charges suffered by account holders as a result of any mistake or delay when transferring accounts.
Further information For an impartial account checker and full details on banking codes, visit the BBA website