Advantages and disadvantages of switching business bank accounts

Advantages of switching business bank accounts

Switching business bank accounts is a lot easier than it used to be and there are number of good reasons to do it:

• It’s quick and easy to do
  The Current Account Switch Service was launched in 2013 and all of the well-known banks in the UK are signed up. This service takes charge of moving your old account to the new one in seven working days, including your account balance and any incoming/outgoing payments. If someone tries to pay you with your old account details, the funds will automatically be redirected to your new account.
• You’re unhappy with your current provider
  Before switching became easy to do, most businesses would put up with their bank even if they’re weren’t happy with the service. Now, you can vote with your feet.
• Save money
  If you’ve been with your bank for a while you might find their fees and charges have crept up. You might find you’re paying for services you don’t actually need. Reviewing what’s available on the market you’ll quickly find that there’s a huge amount of competitive deals to encourage businesses to switch – from free business banking to free software access.
• Access to better services
  One of the reasons the Current Account Switch Service was set up was to increase competition in the banking sector. With a whole raft of new ‘challenger’ banks on the scene, such as Starling and Monzo, all the banks have had to up their game. That means consumers and businesses are seeing products/services being developed to entice new customers.  
• Tailor to your needs
  Many banks now offer a greater range of accounts to suit different businesses. For example, if you’re a sole trader or freelancer your needs will be different to a larger international business.

Disadvantages of switching business bank accounts

Despite the ease of switching bank accounts, there are still drawbacks that need to be factored into your decision-making process.

• Changing your details on stationery
  Whilst the CASS will look after most of the admin, you’ll still need to make sure your new bank account details are updated across your financial documentation such as invoices and purchase orders – and ensure relevant teams are notified.
• Can be a red flag on your credit file
  Depending on the type of account you’re opening, the new bank will need to perform either a soft or hard credit check. If it’s a hard credit check then this will appear on your credit file. This also comes with the risk that you’ll be declined. Changing banks regularly also doesn’t look great for credit applications. 
• Access to perks
  Through your existing bank, there may be perks you’ve built up through years of using the same provider. For example, will you still be able to get credit as easily when you switch? If you do have credit cards or an overdraft with your current provider this may complicate the switch.
• Lose relationships
  If you’ve got a good account manager who understands your business needs, you’re going to lose the benefits that come with having a long-standing relationship. You’ll need to build this understanding again with your new bank.

So, should I switch business accounts?

You’ll need to weigh up all the factors we’ve outlined in this article. Certainly, if you were put off switching thinking it would be too-much hassle – that’s not the case. There are also plenty of financial incentives and service-related reasons to switch your bank account.

However, some of the factors are less immediately tangible. Whilst on the face of it you might not be happy with your current provider, there could be useful services you’re not taking advantage of – products that are only available to long-standing customers. There’s also the fact you’ll be starting from scratch with a new bank and losing potentially useful connections and insights that come with this. That said, finding the best business bank account for your the specific needs of your business could change the way you manage finances for the better.

Although, you should also bear in mind that some banks are not taking on new customers right now due to the Covid-19 pandemic.