Article by Richard Catlin - 19th December 2018

A Cautionary Tale About Switching Banks

Switching current account providers is incredibly easy these days – and I can vouch for that from recent personal experience. But experiencing the process first hand has also served as a reminder that it’s not completely flawless and that if you don’t pay attention, your Credit Rating could take a hit – even if it’s a temporary one.

Having been a loyal First Direct customer for around 15 years, I was finally tempted to move away by mobile-only challenger bank Starling.

First Direct had done nothing wrong – I had always experienced the same outstanding customer service (which has helped them top our annual banking and card survey for the past 11 years) whenever I had need to contact them, but the online and mobile banking still felt like it was stuck in the mid-2000s and so I felt it was time to try something new.

After being with the same current account provider for such a long time, I wasn’t sure what to expect, but armed with nothing more than the Starling app, the wheels were set in motion on my switch with just a few taps.

Life lesson #1: Always check things for yourself

I was reassured that under the Current Account Switch Guarantee, everything would be taken care of for me, including migrating all existing outgoing and incoming payments from my old account to my new one, shifting balances across and closing the old account.

Indeed, over the next couple of weeks, I received regular notifications that existing regular payments had been set up and would be taken from the new account as scheduled. On the day of the switch, my balance was automatically moved across and the old account closed.

A few regular payments were still showing as ‘pending’ but they weren’t due until later in the month and I wasn’t too worried – one of the promises the Current Account Switch Guarantee makes is that it will refund any charges should anything go wrong.

Life lesson #2: sometimes you need to Take Matters into your own hands

A few days later, I got another push notification from Starling, advising me that it was still waiting for confirmation that a handful of regular payments had been set up. One of those jumped out at me - my monthly repayment on a personal loan.

My next port of call was to contact my loan provider to ask them whether my Direct Debit was due to come out of my new account. I was advised that payment was still due to be requested from my old (now closed) bank account.

The customer service representative that I spoke to suggested that the only way to be certain of avoiding the payment being rejected – and a late payment marker being added to my Credit Report – was to make an additional manual payment for the amount due. Just what you want to hear at this time of year.

Life lesson #3: Protect Your Credit Rating where possible

A late payment fee of up to £25 for paying late would clearly not be a welcome Christmas present, but that would be the least of my worries. In addition to the penalty for missing a payment, my loan provider would also share the information with the UK’s Credit Reference Agencies – which would then be visible to other lenders and would potentially reduce my chances of getting approved for credit in the future.

Even if the late payment fee was subsequently refunded as part of the Switch Guarantee, it would potentially involve a lot of further to-ing and fro-ing to get the record of the late payment removed and would likely take at least a few weeks. Whilst I have no plans to apply for credit right now, I wouldn’t like to do so knowing that the most recent entry a potential lender could see was a late payment.

It’s only really because of my job that I was so on-the-ball. Many people will simply take the Switch Guarantee as gospel and assume that payments will transfer okay and even if they don’t, that someone else will sort out the problem for them. It’s likely that any late payment that comes about because of switching banks like this will eventually be removed, but it won’t be instant.

The moral of the story is that whilst it might be easy to switch current accounts, it’s not an excuse to risk your Credit Rating. Keep a close eye on every single payment that is meant to switch over and consider monitoring your Credit Report whilst it’s going through.

If you haven’t already, you can try checkmyfile free for 30 days. After that it’s £14.99 a month if you don’t cancel – which can be done at any time online. You’ll see data from all four Credit Reference Agencies together and get a good idea of how a typical lender is likely to rate you.

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