Switching business bank accounts can be tempting, especially if you’ve just reached the end of free banking offer. Changing to another bank can allow you to take advantage of another sign up offer, enabling you to save money. But how often can you switch bank accounts as a business and are there any disadvantages of switching?
In this article, we’re going to tell you everything you need to know about switching your business bank account, from the pros and cons of switching to the process of changing your account.
Should you switch your business bank account?
Many banks offer free business banking for the first 12 months to lure business owners in, but what happens once that first free year is complete?
You’ll usually start to be charged transaction fees, as well as an account maintenance fee once your free term ends. You may also be charged for a credit card and for paying in cheques. You’ll need to check with your bank for details of your account charges as every bank is different.
Switching banks can seem tempting due to fees being incurred. However, there are as few things that you’ll need to consider when thinking about changing business bank accounts.
Read on to discover whether you should consider switching business bank accounts.
What is a business bank account?
As the name suggests, a business bank account is a bank account which is used for money acquired through a business. A sole trader or commercial business owner can open a business account to manage the finances of their business.
Through a business bank account, you can usually keep track of:
The cash balance
Money owed to creditors
Money owed to the business
The features of business bank accounts vary depending on the banking provider chosen, so it’s best to check the account functionality with your chosen bank or building society.
Business bank accounts are rarely free, although they may offer a free introductory period of 12 – 24 months to begin with. After this, they’ll usually charge a monthly account management fee, as well as transaction fees. These fees vary between banking providers so it’s worth checking with your bank.
Why change bank accounts?
There are many different reasons why business owners might consider changing their banking provider.
The most common reason, as we’ve already mentioned, is that any initial free banking period typically ends after 12 to 24 months of joining a bank. This often leads business owners to look for a new bank which offers the same services as the current provider but for a lower monthly cost. This can be a great way for businesses to save money on their banking.
Business owners may also look to switch bank accounts if they are unhappy with their current banking provider. This could be a result of poor customer service, or if the bank is lacking a dedicated account manager.
However, many business owners think that it is difficult to change banking providers, so very few businesses actually go through with switching. For example, business owners often assume that their current bank will make it difficult to leave, switching accounts is a lengthy process and their existing standing orders and direct debits could be at risk. This is far from the truth.
Continue reading to learn the truth about what happens when you switch your business bank account.
What is the Current Account Switch Service?
The process of switching your business bank account to a different provider is actually quite simple. This is because of the Current Account Switch Service, which all major banks have signed up to.
This service allows businesses to change their banking provider by simply contacting a new bank and completing their paperwork. The new bank will then instruct the old provider to close the account and instruct direct debits and standing orders to be moved over.
When you use the Current Account Switch Service, you can choose a date for your accounts to switch over. The process takes just seven working days to complete.
To be eligible to use the Current Account Switch Service, your business must have an annual turnover of less than £6.5million, as well as fewer than fifty employees.
How to switch business bank accounts
The Current Account Switch Service makes it easy for businesses to switch their bank accounts. The process below outlines the steps you’ll need to take to change your business banking to a new provider.
Choose a new banking provider and approach them to open a bank account.
Complete an application form and provide identity to the new bank, as well as details of your business.
You’ll also need to complete a bank account closure instruction form and a current account switch agreement form to allow the new provider to close your old account.
Agree a convenient day for the switch to take place. This should be at least 7 working days after your new bank account is up and running. Your old account will remain active until the switch date.
On your switch date, everything will move over to your new bank account. Your new banking provider will ensure that the transfer takes place smoothly.
Once you’ve switched bank accounts, your old bank account will be closed. The banks will automatically redirect any payments accidentally made into the old account for a period of 13 months following the switch. This gives you time to ensure that your clients have the correct details of your new bank account.
How long does it take to switch business bank accounts?
In the past, switching bank accounts was a lengthy process and many banks would seek to delay matters to put people off changing banking providers.
However, the new Current Account Switch Service means that banking providers have to complete the switching process within seven working days. You can agree a convenient date with your new bank for the switch to take place, as long as it’s at least seven working days after the application is made.
How frequently can you change your business bank account?
There is no limit as to how frequently you can change your business bank account, meaning that you could change banking providers every time you lose your initial benefits of opening a bank account. However, it’s important to weigh up the pros and cons of changing providers before you decide to make the switch.
Is it bad to switch banks too often?
Although you are able to change your bank provider as often as you’d like to, there are some benefits to remaining with the same bank for a long period of time.
Firstly, you may attract benefits for being a loyal customer of a bank. You’ll also have the time to build up a close working relationship with your account manager, meaning that you’ve got someone to go to with any questions or issues.