It isn’t just personal current account customers who can take advantage of the free Current Account Switch Service to swap between banks, because small businesses up and down the country can make the most of the service, too.
Launched by the banking industry in September 2014, the service ensures that existing payments such as direct debits or standing orders will be moved to the new account automatically, and any transactions that do go through to the old account will be redirected to the new one for 13 months, so payments won’t go missing.
The company making or taking the payment using the old account details will also get a message instructing them to update their records with the new account information. On top of that, the service is backed by a guarantee that means that if something should go wrong during a switch, any charges or interest will be refunded.
Until the service was brought in, changing from one account to another could be a lengthy process, typically taking between 18 and 30 days after the new account had been opened. That was a huge hurdle for cashflow-reliant small businesses, with worries about invoice payments ending up in the right account or suppliers not being paid according to terms, with the possibility of late payment charges being incurred.
But that time’s been reduced to seven working days from the day the switching process starts to when the switch takes place.
One of the drivers behind the Current Account Switch Service has been to increase competition between banks and make it much easier for small businesses to vote with their feet when it comes to picking the account that works best for them.
So, is it time for you to look at whether you’re getting a good deal with your business banking? Here are the things you should consider…
Do I need a business bank account at all?
If your business is a limited company you must have a business account. If you are a sole trader or partnership, you could use your personal current account, but that can make your finances messy. Keeping personal and business accounts separate is the better option.
Am I spending too much on bank charges?
Some banks charge a fee for business banking services, some don’t. Other costs are transaction-based, such as fees for cash withdrawals, cheques, Bacs transfers and overseas payments. Think about what you need to use and check the charges for each service. Some providers offer free banking, either for a set time or with limits on the number of transactions per month. Look at the penalties for exceeding those limits, and any charges that kick in when the free banking period ends.
What if I need an overdraft?
Costs can be quite high but will vary between banks. Check interest rates, set-up fees and the amount you can borrow this way.
And what about a business debit card?
Many business accounts come with these facilities, but ask to see if you’re eligible for a debit card – and a cheque book, if you need one – before changing to an account where you might not qualify.
What if I’m not happy with my new bank?
With the new Current Account Switch Service you can change your provider again, quickly and easily.
Will switching affect my business credit rating?
Not as long as you repay any outstanding overdraft with your old bank or building society. If there are any problems with payments as part of the switching process, your new bank or building society will put them right and make sure your credit rating is not affected.