HSBC data shows that 54% of people in Britain have had the same current account for over a decade and 2 in 5 remain at their same bank for over 15 years.

This is despite 64% of people reporting they receive no benefits at their current bank.

So, is switching bank accounts a good idea or not?

Switching your bank account is a personal decision and many people are happy to remain with their existing account for the simple reason of convenience. If you want better interest rates so you can earn on your savings then it could be beneficial to shop around for better deals.

Be careful not to switch too many times as this could affect your credit score!

Reasons for switching banks

• Many banks offer rewards to new customers, you could receive a cash, travel, voucher rewards if you switch
• A new bank could offer better interest rates than your existing one.
• You may have had some issues with your existing bank account e.g. fraud issues or service and need a switch.
• You may want to open a savings account with better interest and need to have a current account with the same bank first.
• You want to open an appealing junior account for your children and you need your own current account at the same bank.
• Your local branch shut down so you need to move to a bank with a branch nearby.

Does Switching banks accounts affect my credit score?

When applying for new bank accounts they will run a check on your file which leaves a trace on your credit report which other lenders later on could see.

With multiple checks on your file leaving a mark this could reduce your chances of being accepted.

When applying to a bank they will either run a hard or soft credit check, make sure to avoid too many hard credit checks as these leave a noticeable trace on your file.

If you plan on taking out a loan e.g. getting a mortgage within the next 12 months then you should wait before you switch bank accounts as the file will not have recovered from the credit check yet.

When you are trying to save money it is best to find the right type of account to keep it safe and this could be a savings account or an ISA.

ISA

An ISA is an effective way to save large sums of money and be a secure account to keep the money from being used daily.

There are different forms of ISA’s including, Cash, Stocks and shares and lifetime which you can set up depending on what your purpose is.

Pros

• A tax efficient way to save money
• Your money will be passed on to a spouse or civil partner if you die.
• Option of a lifetime ISA where the government will give you a 25% bonus to buy a house.
• A great option for saving larger amounts where you can earn more.
• Investment opportunities.

Cons

• Annual deposit limit- usually £20,000.
• Limited on when and how much you can withdraw from your account.
• Some will have exit fees.
• You can only open one type of ISA a year.
• Must be over 18.

Regular savings account

Having a savings account is essential for savers and the most common way to save. This could be with a bank of your choice and will give you an easy way to put money away.

There are different forms of savings accounts including, easy access, fixed term and notice accounts.

Pros

• You can easily withdraw money making this a more flexible option.
• Easy to set up and transfer money with no limits on deposits.
• Junior accounts are available for over 11 and a great way to teach financial responsibility with supervision.
• You can open as many savings accounts as you need

Cons

• You could be taxed on your interest earnings.
• The interest rate fluctuates and so you could have to change your bank.

Opening an ISA is popular for longer-term savings such as for buying your fist home whereas a regular saving account is great for short-term savings when you need flexibility.

Often you will be able to earn better interest rates with a regular savings account as most people don’t reach the threshold for paying tax on earned interest.

You could also open both an ISA and regular savings account to help you save.

The amount of fraud cases has been rising and with digital banking becoming the new norm there are many ways someone can get access to your account. It is important to stay aware of scams so you can protect your accounts.

 The Guardian reported that fraud cases in the UK more than doubled in 2023 to £2.3bn.

Bank can help you prevent fraud as well as claim refunds if you are a victim to fraud. Some banks such as, Monzo have a high fraud rate as well as being rated poorly for reimbursing their customers which could be a factor to consider when choosing your bank account, especially if all your savings are there.

If you are a victim of fraud, you can report this and seek help from your bank.

The PSR conduct research to discover which banks were subject to the most fraud as well as the rate at which reimbursement was provided to customers.

UK Finance has found that APP fraud in the first half of 2023 came to a total of £239.3m and there was £152.8m returned to the victims.

APP fraud

This is when a customer is tricked into authorising a payment to an account controlled by a criminal.

APP stands for authorised push payment.

What is being done about bank fraud?

PSR are introducing mandatory reimbursement for victims of APP scams meaning banks will have to abide by these rules to help their customers further. They rules will be introduced later in 2024.

You bank should help you if you are a victim of fraud, if they don't you have the right to push for it.

Keeping your money safe is a top priority and customers expect their accounts to be secure. This is why when picking your savings account you may want to consider the banks which have a reimbursement policy.

The banks with the highest fraud rates

If you have decided that your child is ready for their first bank account and ready to learn about financial responsibility then below are some great options for junior bank accounts.

Most junior bank accounts are accessible for children between 11-17 and will need a parent or guardian to be a joint account holder. Your child won’t be able to open a bank account on their own until they are at least 18.

We are living in a cashless world and so if you give them pocket money this would be most beneficial being sent into a bank account, as well as being a secure way for your child to spend.

If your child is asking for more financial freedom and you think they are ready to learn then a junior account is a great option for them.

The benefits of Junior bank accounts

• Having a bank account is a great way to teach children financial responsibility as they will not learn this at school.
• Teaching your child healthy spending habits from a young age will help them when they are adult and have their own money, they can carry these habit on.
• Having a bank account will help your child feel a sense of independence and they can take their money seriously
• They can learn how to budget and prioritise what they want to spend on.

A study done by Cambridge University found that children’s financial habits are formed by 7.

This is why it is so important to teach financial responsibility from a young age.

Parent controls

• Junior accounts will have spending controls to protect you and your child.
• There will be no overdraft feature so there is no risk of your child getting into debt, when their money is gone, it’s gone.
• Some accounts will block certain places such as pubs, bars and off-licences so the card will not be able to be used here.
• Some will set spending limits so your child cannot overspend.
• You will be able monitor the spending habits of your child through a mobile app which you will both have access to.

At 18 the account will automatically become an adult account and your child will have full freedom. It is best that they have learnt how to correctly handle their money with your help before this transition happens.

Stay on top of your Credit card payments and avoid debt.

There is a lot to organise when you are moving, especially when moving across the world!

If you are permanently moving to Australia you will want an Australian bank account, this will help you avoid charges and give you a secure way to spend, save and receive payments whilst in Australia.

There are 4 main banks in Australia

ANZ – Open an everyday account with ANZ to hold money and receive your salary. There will be a $5 monthly fee to have an account with them. ANZ have wide access to ATMs across Australia so you will be able to withdraw without any fees if you use these.

Commonwealth Bank – Known as Australia's largest bank. Offering assistance with your move to Australia to help you settle in quickly. You can open an everyday account and a savings account. There will be a $4 monthly fee to have an account however they offer new customers 12 months free to set you up with ease. You will be able to avoid withdrawal fees as they have a network of ATMs and branches across the country.

Westpac – One of Australia's first banks. You will have a $4 monthly fee to have an account here, after your first 12 months which you can get for free as a new customer. They offer fast and secure banking using mobile apps and more. You will have no fees when sending money overseas, meaning you can send money back to your friends and family with no trouble.

NAB – Known as Australia’s largest business bank helping small, medium, and large businesses take care of their finances. You can enjoy no monthly fees or withdrawal fees when you have a transaction or savings account with NAB. You will have to go into a branch to set up your account when you arrive in Australia.

These banks will often waive the monthly fees if you meet these requirements;

• Deposit $2000 a month
• Be under 25 or over 60
• If you are a full-time student

What you will need to set up a bank account

You will be able to start the process of setting up a bank account whilst still in the UK however, you will have to complete the process once you arrive and go into a branch.

To start the process online you will need.

• To know your arrival date in Australia and arrive within 3-12 months after setting the account up.
• Know which city you will be living in and potentially a specific residential address.
• Upload documents, Passport, Visa, Confirmation of where you will be living.
• Be over 18.

Once you have uploaded the correct information online you will have to verify all the documents again in person so you can withdraw, spend, and move money.

Accounts you can open before you leave

• HSBC – They offer international accounts which operate in Australia, the everyday global account. This includes free withdrawals but only from HSBC ATMs. You will need proof of a residential address in Australia to apply as well as proof of a source of income and the purpose of the account. A bank with HSBC could be an easy way to set yourself up before getting on the plane and give you one less thing to worry about once you are there. However, they do not have as many branches or ATMs as the main 4 banks will have in Australia.

• Wise and Revolut – online banks such as these can be a great option if you haven’t set up in Australia yet as they are great for international travel. You will be able to spend without any fees and you can be paid AUD into these banks. They are easy to set up and can get you started without any fuss. They may not be a great long-term option but for the first few months when you have so much to set up, they could work for you.

When buying a house, you will have to take out a mortgage loan from a bank or building society of your choice such as Lloyds, Barclays, Nationwide, NatWest Bank and more. It is overwhelming to wade through all the jargon and information so this is a short guide on the different types of mortgages that you could take on.

You will have to pay back your mortgage loan plus interest to the bank or building society by the end of your term which you decide on, this could be 2 years, 5 years or more.

Fixed Rate

• This is the most common type of mortgage for people to take on.
• You pay the same rate for a set number of years making monthly payments.
• You can decide how long your term is, 2 or 5 years is the most common however, you can choose a longer term of 7 or 10 years if you wish.
• This type of mortgage means that the amount you pay each month remains consistent regardless of the Bank of England base rate.
• At the end of your term, you will have to remortgage or be moved over to the lender’s standard variable rate (SVR) which is usually more expensive.
• You cannot exit your term without having to pay an early repayment charge.

Tracker Mortgage

• The lender tracks the Bank of England base rate and changes along with it. They also add a set percentage.
• The current base rate is 5.25%, so if your bank’s set rate is 1% you will have to pay 6.25% interest on your loan.
• Some of these types of mortgages will come with a limit so your rate can only fall to a certain level. This means even if the Bank of England base rate falls lower, your rate will not drop that low.
• There will not be as much consistency with this type and the amount you pay back each month could regularly change.

Discount Mortgage

• Your lender could change their SVR meaning your rate could change as well.
• Your rate will not depend on the base rate of the Bank of England but on the lender's SVR. This means that even if the base rate of the Bank of England goes down, yours will not be affected, however, if it goes up yours will not automatically go up as well.
• These types of mortgages can often have the lowest rates however your lender could change this at any time.

Interest only Mortgage

• During the set term, you will only have to pay back the interest not the actual amount you borrowed.
• When your term is up that is when you will have to pay back the amount you borrowed in a lump sum.
• You will have to have a secure way to make sure you will be able to pay back the whole amount by the end of the term.
• This type of mortgage is not as common as the lender will require proof that you have a plan to pay them back in full.

Factors to consider when deciding which one is best for you

• Will your income regularly change?
• Could you manage if your monthly payments suddenly went up?
• Do you like to have consistency and know what is coming ahead of time?
• Will you be able to pay the whole amount each month for the whole term?

A new mortgage model will soon become available in the UK called the Dutch-Style Mortgage which could make it more affordable for people to take out mortgage loans.

Taking out a mortgage loan is the biggest financial commitment you can make so it is important to have all the information and to shop around for the best deal for what you need. You can use sites to compare different deals making it simple such as Compare the Market.

You can use a mortgage calculator to determine how much you can afford to borrow without accumulating debt and getting yourself into a bad situation. This will take into account your salary and how much you have for your deposit. It is important to take into account other factors such as your existing debt, you’re spending and how much the deposit will be, so don’t get caught out.

But we’re now seeing a divergence among banking behemoths. No longer is Wall Street a united front in corporate American culture. They’re each carving out their own protocols as to when and where work must get done. Citigroup and UBS have taken a hybrid approach, citing the distinct benefits of being together in person while also recognising that working remotely has benefits and creates flexibility for employees. Meanwhile, Goldman Sachs and Morgan Stanley have pushed for employees to return to the office five days a week, saying that everything else stifles innovation, training and mentoring.

Many of these large financial institutions have invested enormous resources into office space. Goldman’s headquarters at 200 West Street cost $2 billion to build more than a decade ago and this spring, JP Morgan unveiled plans for 2.5 million square feet of office space in midtown Manhattan. It’s hard to imagine they’d leave these spaces largely empty, particularly when they think there are plenty of people who would be willing to come in and work for them. After all, big banks remain highly desirable workplaces, garnering thousands of job applicants per year only to accept, in Goldman’s case, less than 2% of them – making the institution more selective than Harvard.

No longer is Wall Street a united front in corporate American culture.

Of course, the past year has been a grand experiment with different work practices. Wall Street’s banks now have four options:

1. Everyone needs to be back in the office full time.
2. Everyone needs to be back in the office two or three days a week.
3. Everyone can work remotely.
4. Everyone can choose where they work best.

From our perspective, we think there’s an important insight that decision-makers are missing. For the first two options, being in the office gives managers the ability (or so they think) to see exactly what their employees are working on when they clock in and out, and who is meeting with whom, raising their sense of certainty. It also gives them a sense of control by dictating when and how work happens. These two actions – raising their sense of certainty and control – may make a manager feel better, but they aren’t accurately calculating how much worse it could make their teams.

According to our research, a majority of employees across a variety of sectors – 54% – don’t want to be back in the office at all and 40% want hybrid options. Only 6% of respondents want to “always or mostly” work in the office. Having to return to the office can threaten people’s sense of status, or their sense of value. They feel untrusted and treated like children. Second, it can affect their sense of autonomy, or our sense of control over a situation, which researchers have found is strongly tied to job satisfaction. Finally, returning to the office also triggers fairness threats, particularly since both the quality of people’s lives and their work performance may diminish when forced back.

The real challenge is that returning to the office isn’t a zero-sum game. A manager feeling more in control turns out to be less of an issue than an employee who feels less in control. The reason? In the brain, a drop in certainty or autonomy turns out to be significantly stronger than an increase in the same experience. Our brains are built to pay far more attention to negative experiences than positive ones, perhaps for good reason: if you miss a reward you may miss lunch, but if you miss a threat you might be lunch. The result is that managers may not notice that they feel slightly better, but their teams feel dramatically worse.

The big question that no one can answer yet, is the true cost of these different options. When you add in the emotional rawness we all still have from the roller coaster of the past two years – the net effects of offering choice in work environments may outweigh the upsides of mandating people be back in their office swivel chairs. If you require everyone back in and use the real estate, what percentage of employees will you actually lose and what does it cost to replace them? Will that cost matter if others want to come in? Similarly, we know that only 3% of Black professionals want to return to the office full-time and that women prefer working remotely compared to men. Will requiring office time then impact your diversity, if the majority of people who are happy to work nine to five in a city office come from similar demographics? Further, what is the net drop in productivity of making people return to the office, given that working from home is about 25% more productive than working in the office?

When viewed from that perspective, it may be best to consider the net effect of all these considerations, compared to the benefits of being together all week. When much of the work can be done virtually, getting together feels special; people are excited to see one another and be productive together. They feel respected and appreciated, instead of being treated like employee No. 749. They’re eager to come to the office for a few days each month for a working session and then grab drinks after. And that, ultimately, may be the best return on an investment you can make right now.

Banks are a necessary part of the small business landscape, a 2020 survey of SMEs by Statista found that 99% of SMEs work with a bank or building society. Small businesses are often extremely loyal to their bank, unfortunately, that loyalty is rarely reciprocated. 

Banks rarely go beyond the bare minimum when it comes to supporting SMEs: products are designed for mass use, but poorly suited to the needs of any individual business. While banks are increasingly coming around on the need for technology and digitalisation, they are followers, not leaders in this space.

Why banks don’t serve modern SMEs

For an example of the issues with banks, let’s look at onboarding. Getting a small business set up with a bank is a frustrating, time-consuming experience at the best of times, and it’s made significantly more challenging by the inclusion of any changes, such as complex entity structures and special purpose vehicles (SPVs). The old-fashioned process often requires in-person attendance at a branch, even following Covid, and can take weeks.

Overall, banks are large, slow-moving institutions. They have historically been successful, and they’re reluctant to rock the boat as a result; innovation is risky, and banks like to play it safe. They’re wrapped up in legacy red tape and long-outdated processes, but every bank is in a similar position, so there’s no competitive pressure to do better. Unfortunately, the very loyalty that SMEs show to their banks also means that they have little incentive to improve. 

FinTech’s enter the scene

According to the Federation of Small Businesses, SMEs make up more than half of all UK business turnover. This represents a remarkable opportunity, so it’s no surprise that entrepreneurs have leapt into action. Seeing a clear gap in the market, newer, nimbler companies have emerged specifically to serve the needs of SMEs. 

Unlike the big banks, these businesses are eager to innovate and leverage technology to deliver a set of features designed to make life easier for small business owners. Compare the weeks-long process of signing up for a bank with that of signing up with a fintech - which is straightforward, takes minutes, and can be done from the business owner’s smartphone. 

Over the past decade, these alternative financial services (AFS) have evolved from plucky start-ups to trusted institutions in the small business world. Providers have built out their ecosystems, ironed out early issues, and now represent a realistic alternative to the old banking giants. 

What can SMEs do?

Every SME is unique, and each one has different needs from its financial provider. The first step that small business owners should take is to ask themselves questions about what they need from banking and expenses and the challenges they face. Often, this is something that SMEs have never seriously considered – the big banks are so well established, it’s easy to forget that there are other options or assume banks are the better one. 

Many SMEs don’t actually need to work with a bank and would be better off with an alternative financial provider. For instance, modern payment providers offer many of the same services as a bank, yet are far more responsive and deliver a higher quality of service. In fact, many providers connect SMEs with a dedicated account manager from day one, making the transition over as simple and hands off as possible. 

For others, a more tech-savvy partner may act as a supplement to the bank, adding capacity rather than replacing it entirely. Many businesses use the bank to store funds while managing them through a tech platform for greater insight into their finances. Combining a core banking solution with specialised solutions for the financial processes a business regularly needs – such as managing employee expenses, international payments, and foreign exchange – is well worth considering for SMEs which aren’t ready to ditch their banks just yet. 

The future of SME finances

There’s no doubt that the entry of fintech’s and alternative financial service providers has spurred banks to improve their offering, but they still lag far behind. It could be years until they implement the quality-of-life features that every smaller provider already has. For that reason, SMEs leveraging new providers – whether instead of or in addition to a bank – will have a competitive advantage. 

About the author: Simon England is Managing Director at Equals Money. 

In 2008 Central Banks bailed out the financial universe following the collapse of Lehman. They provided unlimited liquidity in the form of Quantitative Easing and Negative Interest Rate Policy to dodge a global recession and enable the longest bull market on record. In 2012 the ECB saved the Euro and Europe by doing “whatever” it took. In 2020 central banks stepped in to stabilise wobbling COVID struck economies with rate cuts and yet more liquidity.

Today? Central Banks are being assaulted on every front. Politicians are questioning their independence – blaming them for the effects of the sudden Ukraine War Energy and Food inflation spike. Markets are watching the bull market unravel and blaming Central Banks. Read any research on the market and it will cite “Central Bank policy mistakes” as the most likely trigger for recession, stagflation, and market collapse.

Financial professionals under the age of 40 have never known normal markets. They’ve learnt their trades in markets where Central Banks are expected to step in a stabilise markets, to prop up too-big-to-fail financial institutions, and keep interest rates artificially low, thus juicing markets ever higher. I reckon over half the market workforce – fund managers, bankers, traders and regulators – will never have encountered market conditions like those we’re about to experience as it all goes horribly and predictably wrong.

Thankfully, there are few old dogs like me still wagging our tails in markets. We’ve seen it all before. Proper market crashes, interest rates in double digits, mortgage rates that will make a millennial’s heart tremble, and inflation the likes of which we are now seeing again. But, even we don’t know what happens next. This time… it is different.

We can’t blame Central Banks for the war in Ukraine – that’s a classic exogenous shock. It’s a crisis the politicians really should have figured out, foreseen and prepared for. One of the prime duties of the state is security, and it’s the insecurity of energy and soon, food supplies, that have triggered the inflation shock.

The reality is exogenous shocks outwith central bank control have precipitated inflation in the real economy. But, let’s not kid ourselves: two factors successfully hid inflation for the last 12 years:

1. Most of the liquidity injected by central banks since 2008 flowed into financial assets (stocks and bonds), where price inflation was mistaken for investment genius. (It’s also generated massive wealth inequality between those that own stocks and those that don’t.)
2. In the wake of COVID, supply chains have unravelled. The Geopolitical Tensions now apparent between the West and China mean the end of the age of globalisation – and it was cheap Chinese exports that created the deflation that kept inflation artificially low during the twenty-teens.

In retrospect, the whole bull market of the Twenty-Teens looks increasingly false – a Potemkin village boom founded on overly cheap money, government borrowing and undelivered political promises. Abundant liquidity enabled the age of the fantastical – growth stocks worth trillions but profits measured in pennies, crypto-cons, SPACs and NFTs. Booming markets supported by accommodative central banks have spawned a host of consequences – few of which will prove ultimately positive.

Central Banks knew the risks from the get-go. They have been trying to figure out how to undo (or taper) the consequences of their monetary stimulus while maintaining the market stability critical for Western Economies. That has all suddenly unravelled at speed because of the inflation shock.

It’s the decisions taken over the past 14 years by Central Banks have led us to this critical moment in economic history. Since 2008 central banks have been using monetary experimentation to stabilise and control the economy and markets. And, as always happens, suddenly it’s turned chaotic. Its only now becoming apparent just how much these policies created massive market distortions, overturned the traditional investment narrative and caused the most massive misallocations of capital in global financial history at both the Macro and Micro levels.

Oops. 

Take a look at markets over the past 14 years and figure it out:

• The most speculative asset bubbles in history?
• Tremendous financial asset inflation on the back of ultra-low interest rates?
• Whole new financial markets like cryptocurrencies and NFTs emerging on the back of the broken monetary model – which will likely prove absolutely hollow scams.
• And the power of FOMO (Fear of Missing Out) dragging in millions of inexperienced retail investors to meme stocks – where they are now likely to be skinned and gutted?

Oops again…

How did it go so wrong? The Global Financial Crisis of 2008 threatened a global depression. The problems were multiple – a dearth of bank lending (caused as much by draconian new capital regulations as risk aversion), economic slowdown, and incipient recession… Central banks were forced to act, and flooded the economy with liquidity in the hope it would stimulate growth.

It didn’t. It created market bubbles. Investors quickly realised the easiest way to generate returns was to follow liquidity. Corporate managements figured out the best way to improve their bonuses was to inflate their companies' stock price – not through carefully considered investment in new plants and products to improve productivity and profits, but by borrowing money in the bond markets to buy back their own stock. And that’s worked well…Not! All that money has now been lost by crashing markets, and they still have to repay the debt.

Again… Oops…

In Europe the 2012 sovereign debt crisis followed the banking crisis, triggering massive fears of imminent country defaults and the Greek debt crisis. The ECB did what it took and used monetary policy to advance billions to banks through Targets Long-Term Repos and other emergency measures… Very quickly banks and the market realised central bank liquidity was an arbitrage opportunity – if the Banks were buying bonds, buy more bonds to sell to them!

As a result, nations like Italy saw the cost of their debt plunge, allowing some of the most heavily indebted nations to continue borrowing… Yet there is no guarantee, and never will be, that German taxpayers will ever agree to pay Italian pensions. As the German terror of hyperinflation is raised, and Europe suffers stagflation, it's highly likely we will see new tensions across European debt arise. That’s why it’s a politician rather than a central banker running the ECB!

Guess what… Oops…

How did the Central Banks intend to undo the consequences of the distortion they created? Taper? Hah. We are passed that stage now. I guess we will never know how they planned to untie the knot they created...

The good news is chaos spells opportunity for smart investors!