Is changing banks for free cash really a win-win situation, or could it damage your credit score? Money expert Martin Lewis reveals the pros and cons of the incentive in the lead-up to Christmas
Swapping banks for an ‘easy’ buck might sound like a good idea – but could it ever backfire?
In the lead-up to Christmas, every penny counts, and cash-strapped Brits are desperate for a quick fix to top up their balance. Many high-street banks are currently offering cash incentives if you move over to them, as well as perks including free cinema tickets, magazine subscriptions, and monthly cashback payments.
The Current Account Switch Service (CASS) is a relatively straightforward one, meaning your money will be transferred safely within seven working days. This also means payments made to your old account (such as your salary) will also be moved into the new account for at least three years.
Money guru Martin Lewis has now settled the debate around whether moving banks for free cash is a good idea, or whether it could harm your finances in the long run.
“If you do one switch, it’s an application on your credit file which has a very minor, short-term negative effect,” Martin said. “Lots of those in a short space of time can be an impact. Banks also like to see evidence of longevity, so that’s also slightly negative. So I wouldn’t switch my bank account if I had a mortgage application during the next two months.”
However, if the above scenario doesn’t apply to you, the expert says it’s only a ‘very minor’ hit on your credit score, which probably won’t affect you in the long run. “Switching very regularly to make money can have a bigger impact,” he added.
“Do you have a use for your credit working? Do you have a debt application you want to make, or a mortgage application you want to make? No, well, in which case it’ll have an effect, but why do you care?” If you live near a banking branch and often visit in-store, it is worth taking this into consideration when moving banks.
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What banks are offering free cash incentives?
At the time of writing, Lloyds Bank is offering a £200 incentive if you switch to a Club Lloyds account by December 10. On top of the free cash, new customers can also opt for a reward each year – which includes a 12 months subscription to Disney+ (with ads), six cinema tickets, a Coffee Club & Gourmet Society membership, or a magazine subscription. It’s worth pointing out that there is a £3 monthly fee for this account, unless you are able to pay in £2,000 or more a month.
NatWest is offering a free £180 for new customers, plus £5 per month in cashback if you meet the requirements (pay in £1,250, pay two or more Direct Debits of £2 or more and log into its mobile banking app each month). The account comes with a £2 monthly fee, so your cashback profit is deducted to £36 a year.
First Direct is offering £175 for switching to their 1st Account for those eligible to swap, while Santander is offering £150, but the money won’t arrive before Christmas. To get this cash, you need to switch across two direct debits and pay in at least £1,500. If you switch to the Santander Edge account, there is a £3 monthly fee – but you can earn up to £20 a month cashback.
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