Banks try to tempt savers to open more current accounts to scoop up cash incentives and perks. But there are pitfalls to be aware of
Bank customers on the hunt for switching bonuses and cashback deals are being cautioned that opening too many current accounts could have unintended consequences. With banks in a fierce competition for customers, millions are being lured into managing two, three or even more current accounts to bag cash incentives and perks.
However, consumer experts warn of potential pitfalls that switchers need to be aware of. MoneySavingExpert clarifies that there’s no rule against holding multiple current accounts – either with the same bank or across various providers.
Different accounts offer different benefits, from cashback on household bills and interest on balances to travel insurance and fee-free spending abroad. Many also tempt with one-off cash bonuses for new customers. But the site, founded by money guru Martin Lewis, cautions that opening several accounts in quick succession can trigger multiple hard credit checks, temporarily denting a person’s credit score.
It also warns that having more than one overdraft can make finances appear overstretched, especially if several are used simultaneously. The site emphasises that while simply holding multiple accounts does not automatically harm credit scores, misuse of overdrafts or rapid-fire applications can raise red flags with lenders.
There are also practical issues to consider. Some current accounts require minimum monthly deposits or a set number of direct debits – conditions that can be easily overlooked when juggling multiple accounts.
Meanwhile, GoCompare has highlighted the benefits of having multiple current accounts for budgeting purposes, such as separating bills, everyday spending and savings. The comparison site also suggests that additional accounts can serve as a financial safety net in case of a lost debit card or a frozen account due to suspected fraud.
However, GoCompare cautions that spreading money too thinly across various accounts can make it difficult to keep track of balances, thereby increasing the risk of missed payments, fees or fraud. It recommends that switchers apply gradually rather than opening several accounts all at once to avoid damaging their credit profile.
Another concern is the protection offered if a bank goes under. GoCompare points out that the Financial Services Compensation Scheme safeguards up to £85,000 per person, per banking group – meaning any funds above this limit held with the same institution would not be covered.
For those with larger sums, distributing money across different banks can enhance protection – but only if the accounts are meticulously managed. Rebecca Goodman, a personal finance expert cited by MoneySavingExpert, acknowledged that the rewards on offer can be tempting but cautioned consumers against rushing in.
She said: “The current account market is extremely competitive, with providers trying their hardest to attract and retain new customers. “This means it’s possible to get a wide range of rewards when you sign up to a new current account, from cash freebies to access to exclusive savings accounts.
“But before you apply for a new account, it’s well worth researching how much you need, if it will actually save you money, if there are any fees to pay, and if you’ll meet the requirements for the account in the first place.”
Both MoneySavingExpert and GoCompare suggest that having multiple accounts can be beneficial for disciplined switchers – but only if balances, fees and overdrafts are tightly controlled.
