Can I switch current accounts with an overdraft?

Can I switch current accounts with an overdraft?

Switching your current account to a different account is easy. The bank or building society you are opening a new account with will do all the hard work for you. They will transfer all your money over and switch your Direct Debits and standing orders from your old account to your new one. They will also communicate with your current bank to close your account and can even update your employer on your new details.

However, if you’re in your overdraft, there may be a few more steps to take. Find out what you can do and what you need to look out for in our handy guide.

What is an overdraft?

An overdraft is a short-term way to borrow money from your current account. They can either be arranged, where you can spend a pre-agreed limit, or unarranged. An unarranged overdraft is when you spend more money than is in your account without arranging a limit with your bank beforehand.

Each form of overdraft will usually have an interest rate attached to it, but an unarranged overdraft will often have a higher rate. You can either be charged daily until you pay it back or be charged a one-off bill. This will depend on the account you have.

Switching if you aren’t in your overdraft

If you are not in your overdraft, you will be able to switch your current account quickly and easily. Some banks offer a reward for switching your account, so it’s worth checking to see what benefits, as well as features of the account that you will receive.

Here’s a quick step-by-step guide on how to switch your account:

  • Make an appointment with your desired bank, either via the phone or in person.
  • Provide any documents that may be required.
  • Let the bank do all the work. There’s usually a waiting period while everything transfers over.

How do I switch if I am in my overdraft?

If you are in your overdraft, you can still switch your account. Although, you may be limited to which account you can switch too. As long as you have a good credit history, most banks will accept your custom, but it is worth researching different accounts to see which are offering the better deal.

Speak to your new provider

Once you have chosen the account you’d like to switch to, it is worth speaking to your new provider to see what overdraft limit they can offer to make sure they can accommodate your overdraft. For example, check they can match your limit.

When you are happy with the details and the bank is happy to accept your custom, they will do the hard work for you to make the switch over to your new account. However, you will still owe the money you took out of your overdraft. Your new account will either transfer your overdraft or offer help on how you can pay it back. Alternatively, you will need to discuss the repayment of your overdraft with your old account.

Agree to pay off your overdraft

Sometimes the account you wish to switch to won’t let you switch while you’re in your overdraft, so you will need to call your current bank to agree on a way for you to pay it off. They may leave your account open until the overdraft has been paid, or they may close it and agree on a different way for you to pay it back.

What should I look for in an account?

When looking for a new account to switch to, especially if you are often in your overdraft, there are few things you should consider to make sure you are getting the right account for you.

  • Do they offer lower interest rates on overdrafts then you’re currently getting?
  • What is the overdraft limit or would you prefer to have no overdraft?
  • Can they help to manage your finances?

How do I get out of my overdraft?

Getting out of an overdraft may not be so easy for some, particularly for those who struggle to budget their money, but staying out of your overdraft may be even harder. If you’re struggling to pay your overdraft back, and the interest charges are increasing, it is worth contacting your bank to work out a repayment plan.

Once you are out of your overdraft, it might be worth considering looking into ways that will prevent you from overspending again. A good place to start would be to evaluate what you spend your money on to help you understand how you run out of money. That way you can work on cutting costs to prevent you from going in your overdraft again.

If you’re not very good at budgeting, an account that helps you budget or doesn’t offer an overdraft, may be the way forward for you.

Here at thinkmoney, we don’t offer overdrafts and we have a budgeting system to prevent you from missing a bill. Tell us how much your bills are each month and we will separate the right amount from your disposable income, so you always know how much you have to spend.