Changing banks with an overdraft?

[meryll83]

I've also posted this on the Budget Board, but not sure if it works the same in the US so have come here too!

I'm thinking of changing my current account to another bank, but can I do this when I have an overdraft?
How does my current bank get the overdraft repaid to them?

 

[Mike Jones]

I may well be wrong, but it seems unlikely that a new bank would want your business until you'd cleared the overdraft, unless you had a very obvious path ahead of you that would lead to a better risk for the bank....

 

[emily1982]

You might want to try Martin Lewis's site www.moneysavingexpert.com. Lot's of good advice and a good forum.

 

[tennisfan]

I remember years ago my parents wanted to change banks but couldn't due to an overdraft, unless they paid it off first.

I think it will be even harder now with the way the world economy looks.

 

[mark123]

A bank has no obligation to accept a transfered account which is in the red but that doesnt mean they will not-could you not just ask at your potential new bank to clarify their position on this?

 

[irongirlof12]

I take it this is a personal account rather than a business account? Any new bank would do a credit check on you with experian or equifax as well. It is not as easy to open an account as it used to be with id fraud etc. and most now ask that your main salary/incometol be paid into it.

you could open a new account and run both in parallell until your overdraft is paid off, then close the old account. this could work better for you.

 

[Boss Hogg]

Have a little knowledge in this (always a bad thing) with 17 years in a High St Bank.

Are you wanting to retain your overdraft, or are you intending on repaying it?

There is nothing to stop you having two accounts with different Banks.

You would need to undergo a credit check before a Bank will open an account for you. In the same way when opening an account you could also ask for an overdraft on the new account and the credit score would also take account of whether the Bank thought you were "fit" for an overdraft and hence give you a decision on the account. So, if you're thinking of retaining it, you would simply send money to your old account from your new one to pay off the overdraft their and then your new account would be at the same overdrawn position as your old account was. In this case, the new Bank may ask to see confirmation that the overdraft has been cleared within a month or so of opening the account.

Should you want to have the new account as an additional one, the new Bank may ask what your intention is around your old account, but, at the same time your answer would not probably have a detrimental effect (unless you said "sod 'em" maybe!), it is quite reasonable to have a second account - whether they feel it commercially viable for them may be a different matter. At the end of the day - not their debt, not their problem.

Having said all of this, no Bank has an obligation to give you an account, but as long as you have a decent credit score you should be fine.

Hope that helps.

 

[meryll83]

Ok, so I've moved some savings around and my account is now in credit, which now begs the question - what happens to my balance?

Does the credit transfer over to the new bank, or does it get sent to me by cheque - anyone have any ideas on how this works??

The new bank has been instructed to close my old account on switching, so I'm a little bit in limbo almost waiting for some information on my new account to come through and waiting for my old one to vanish!

 

[mark123]

Any credit in your account should be transfered directly into your new account. Your old bank will debit any overdraft interest/account charges from your current balance. Any direct debits etc should also be transfered as well. The old account will be closed presuming you do not wish it to remain open for any reason.

 

[UKDEB]

I worked for a major UK bank for 28 years. The Banking Code requires all banks to make switching as smooth and pain-free as possible and all the main banks have teams dedicated to making sure it happens. They have to liaise over the transfer of standing orders and direct debits (the cause of most hassle), and balances, whether credit or debit, must be transferred automatically. In the case of a debit balance, obviously the new bank must have agreed to an overdraft facility. Under the code, the new bank is also obligated to explain the switching process to you, so they've failed in their first duty to you as a customer!

Here are the relevant sub-sections of the code:

7.1 If you decide to move your current account to another bank, we will give them information on your standing orders and direct debits within three working days of receiving their request to do this. Also, we will close your account without unnecessary delay when you ask us to do so.

7.2 We will not make any extra charges for either closing or switching a current account except those already agreed with you or agreed at the time you ask us to close or switch your account.

7.3 If you ask us, we will tell you our policy on whether or not we will pay any legal or valuation charges for the transfer of any security to us.

7.4 If you ask us to, we will give your new bank details of your credit history with us.

7.5 If you want to transfer your current account to us, we will tell you how the process for transferring your account to us will work and where responsibility will lie for each step in the process, including:

• what information your old bank will pass to us;
• what features you will be offered with the new account so that you can compare your new account with features on your old account; and
• how long the transfer is likely to take.

We will give you what you need to operate the account within 10 working days of approving your application.

7.6 We will cancel any bank charges you have to pay as a result of any mistake or unnecessary delay by us when you transfer your current account to or from us.