Can you really switch current accounts?
Yes. As long as you have a reasonably clean credit history and have stayed within your overdraft limits, other banks will generally be happy to accept your custom. After all, if you are in your overdraft, they will profit more from having you as a customer.
That does not mean you will be able to take your pick of the overdraft current accounts available. You will need to do your research and pick an account carefully.
What should you look for in a new account?
If you are in your overdraft the sole aim of switching accounts is likely to be to cut the amount you are paying in interest and charges.
Establish what you are paying now before you start looking at what you can get elsewhere.
Look at the terms and conditions of your existing account:
How much interest are you being charged on your overdraft?
What is your overdraft limit?
How much of your overdraft are you using?
How much are you paying in fees for the overdraft
Consider what other features of a current account are important to you:
Are you happy with online banking, or do you want a branch based service?
Do you need a cheque book?
Is a sweeping service or mobile banking facility a must?
One you work out what you have, and what you need from a new account, you will be able to start your search.
How do you find an overdraft account?
You can use our overdraft current account comparison to search for the account that will cut the cost of your overdraft and suit your banking habits.
Make sure you look at the fine print of any new account very carefully - especially the application criteria - to ensure that you will actually be eligible for the account and that you are aware of all the fees and charges that apply.
How do you move your overdraft?
Once you have found a new account that you want to move to, most of the hard work on your part will be over; most accounts come with a switching service to make the transfer as smooth and pain-free as possible.
As part of the switch you are likely to be asked how big an overdraft you have now. Many accounts will match your current limit, providing you are able to prove it. This may involve taking a bank statement or some other proof of your overdraft limit into a local branch.
What happens once the switch is made?
Once you have moved your banking and overdraft from one account to another you should be paying less in interest and charges.
Now you have made your overdraft as cheap as possible you should focus on paying it off as quickly as you can.
What do you need to watch out for?
It is always worth looking at your options and finding out if you can get a more competitive deal on your current account. There is no point in moving your overdraft to a new account unless you are sure you are getting a better deal for your money.
Even if you find the perfect bank account to move your overdraft to, there is no guarantee you will be able to do so.
It is up to the new bank to decide if they will accept your overdraft and they may turn you down if you have a very large overdrawn balance or have been in your overdraft for a long time.
If your credit history is not up to scratch you may find that a new account provider is not prepared to offer you an overdraft of the size you need.
If you are accepted you will still have to make sure that the account you wish to transfer to can accommodate the overdrawn balance you want to transfer.
For example, you may have £1,000 of overdraft debt to transfer,but your new account is only willing to offer an overdraft limit of £500. In this case, you may need to just transfer half for now or consider a different option.
What is the alternative?
If you have sufficient savings, it is always worth considering using these to clear your overdraft if you are paying more in interest on your overdraft that they are earning.
Unless your new overdraft is interest-free the chances are that you will be paying a significant amount in interest or charges. As they are only designed for short-term borrowing the cost tends to be comparatively high.
As such it is worth looking at alternatives such as using a 0% balance transfer credit card that allows money transfers to cut the cost of your borrowing.
If you are able to get approved for a new current account that offers a more affordable overdraft facility and a sufficient overdraft limit, you could look at transferring your overdraft. This way you would be using cash from your new lower-rate account to clear your overdraft with your current bank.