Things to Consider When Looking for a New Bank
Having a bank you can rely on to manage your finances is a priority, but finding it can be time-consuming. There are approximately 300 banks and more than 40 building societies that offer their services to UK residents, so how do you know which one is right for you? In this post, we discuss the main things to consider when choosing a bank that suits your needs and lifestyle.
Most UK banks still offer free bank accounts, meaning you don’t have to pay a monthly or annual maintenance fee. However, some may require you to keep a minimum balance or to make a minimum monthly deposit, otherwise fees will be charged.
You’ll also want to check if payments are free. Transfers within the UK are usually free except for urgent payments using the CHAPS system, whereas international transfers incur a fee that varies across banks. You may want to check if charges apply to receive money from outside the UK. As more people work remotely, it’s not uncommon to have clients in other parts of the world.
Lastly, you should consider premium or packaged accounts, which offer access to a wider number of features such as insurance, special interest rates, or breakdown cover. These accounts come with a maintenance fee, so do some research to figure out whether it’s cheaper to pay for those services separately.
If you think you may need an overdraft, ask the bank how much they offer and what are the fees. Overdrafts are usually reviewed every year, so ask about how easy or likely it is that yours will be increased. Also consider what happens if you go over, as the fees charged by different banks vary substantially for unarranged overdrafts. In addition to high-interest rates (usually in the double digits) some banks charge daily and monthly fees that can add up quickly.
Using your bank card abroad
Banks charge multiple fees every time you use your card abroad: charges apply for converting currency (called non-sterling cash fee) and also for using your card whether it is at an ATM or at a shop. Some banks charge a flat fee, while others may charge a percentage of the transaction. At the time of writing, digital banks had the lowest fees for using bank cards abroad.
Interest on savings
At the time of writing, interest paid on savings accounts ranges from 0.4% to 1.3%. Other things to consider include whether you can manage the account online and if you’ll be penalised for withdrawing money from those accounts.
If you have the cash to put aside, you may want to consider ISA accounts (tax-free savings accounts), as these offer a higher interest rate than regular savings accounts. If savings are a priority or you have a large sum to deposit, find the most competitive rate as ISA rates since their interest rates aren’t standard across all banks
Is it easy to switch?
In some cases, you’ll want to keep your old account open, and in others, you’ll want to close it and switch over to your new bank. In any case, it’s worth finding out if your new bank offers any assistance with the process. Some can take care of every step involved in switching, from closing the old account to moving the balance over to the new account and redirecting any recurring payments you have set up.
Cost of personal loans
At some point, you may need to borrow money to buy a new car, renovate your home, or for emergency expenses. The terms and conditions of personal loans vary enormously from bank to bank. Some may have more flexible eligibility criteria, but of course, you also want to find out the cost of borrowing money. Don’t look at the interest rate but rather at APR rates (the total cost once all fees are added up). Whereas interest rates are often in the single digits, APR of 13% not unusual, so APR percentages are the figure you should use to compare loans. You will find banks prefer good credit ratings, if yours is below average you may have to find an alternative to help with bad credit loans such as Money Trumpet who are an online introducer.
Depending on your circumstances, you may be better off with a special bank account. For example, student accounts typically offer high overdraft facilities as well as freebies like discounted public transportation cards, a cash bonus, or cashback. Bear in mind that many banks will convert your student account into a graduate account when you complete your studies, and the conditions of graduate accounts may not suit your circumstances, especially when it comes to overdrafts and interest on any borrowed money. You may want to shop around for special accounts if you’re a business owner or want an account in foreign currency.
ATM availability is important, especially considering that an increasing number of ATMs are being shut down all over the country. You’ll also want to know services these ATMs offer in addition to withdrawing cash. ATM withdrawal limits are another consideration: these can vary from £250 to £1,000 / day depending on the bank and on the type of account.
Online banking & apps
The main things to consider here are convenience and security. What tasks does the bank app allow you to do online? Does it freeze or crash often? Read through app reviews to see what other users say. You’ll also want to find out if the app is easy to use, even for people who aren’t good with technology. Have a look at app screenshots so you can decide if the interface makes sense to you.
As for web-based online banking, check if the bank requires you to have a separate device to generate passwords and access codes. This may be cumbersome and not so convenient for some people.
Needless to say, security is top priority in both cases: research things like data encryption, two-factor authentication, and what’s the bank approach to customer service if you’re a victim of fraud.
Spend time reading through both positive and negative reviews. Happy customers will only tell one side of the story, so it’s good to have a balanced view that includes critical views. This will give you a better idea of how the bank responds to dissatisfied customers.
As convenient as online banking may be, sometimes you just want to go into a branch and talk to someone face to face. Do some research to find out whether a bank has branches near you and if the opening hours suit your schedule (e.g. are they open on Saturdays?). And if there’s a branch near you, walk past a few times to see how busy it usually is and how fast the queues move.