Ten questions you should ask your bank before you open an account

Ten questions you should ask your bank before you open an account

Bank customers are known for their loyalty, with just 58,000 consumers switching in the last quarter, according to market portal Statista.

Compare this to the all-time high of March 2016 when almost 125,000 switches were recorded.

However, as corporate responsibility and the environmental impact of big business continue to make the headlines, customers are demanding more transparency.

‘I think what’s become more prevalent over the last few years is that people really think about the impact that they have on the world at an individual level — and of course, that comes into work and money,’ says Claire Potter, author of the book, Welcome To The Circular Economy.

She recommends taking the time to sit down and figure out what you want your bank to be.

1. What’s it going to cost me?

As a starting point it is worth checking the levels of interest your bank is offering at present on current and savings accounts, and how this compares to what’s being offered by competitors.

Also consider the fine print and look at how much it charges for such services as overseas payments or going over your agreed overdraft.

Check out guides on reputable sites such as Which? and Money Saving Expert and consider whether you need easy access to cash, or can fix in your savings.

Although the Bank of England base rate remains at an all-time low right now, saving rates are starting to inch up, so it is worth finding the most profitable home for your money.

2. How easy is it to switch?

Consumers are getting used to switching energy supplier or car insurance provider on an annual basis but are far less likely to do this with their bank account, due to the perceived hassle involved.

So when choosing a bank it is also worth considering how easy it is to switch if you want to. Under the Current Account Switch Service banks must transfer everything from your old account to your new one within seven working days.

However, you might worry that your bank could drag its feet and make you jump through multiple administrative hoops when it comes to closing your old account.

‘Switching is nowhere near as hard as people think it is. Banks do a lot of the legwork for you. If you are looking to switch, talk to the new bank you’re thinking of switching to and ask what kind of services they offer to help you switch,’ says Claire Potter.

3. How good is customer service?

When something goes wrong or you have a query, good-quality customer service from your bank is incredibly important. Think about whether you need access to someone in person or if you need to get hold of support on the phone, on a clear line.

Each year, consumer group Which? surveys thousands of bank customers to rank the best and worst banks for customer service. It takes into consideration clarity of communication, service in branch, telephone, online and mobile, and how banks deal with complaints and problem resolution.

Starling Bank currently rates highest with an 88% customer score, while Tesco Bank is bottom with 60%.

4. How do you stay in touch?

Consider how you need to access your bank. Do you want to be able to go into a physical branch close to your home? And is it open when you are available? Check the opening hours and whether the branch is manned or simply offers access to machines.

If you prefer online banking, do you want a user-friendly, easy to navigate app?

Challenger banks like Monzo, Starling and Revolut are leading the way when it comes to the visualisation of finances — so research how they can help you keep track of your money.

5. How secure is my money?

Falling victim to a banking scam can be devastating, so it’s crucial to understand how your bank prevents and handles fraud. In the first half of last year, more than £200million unauthorised payments were transferred to scammers.

‘At the moment, we are seeing worrying examples of banks trying to find ways out of honouring pledges to help victims of scams,’ says Chloe Roche, scam recovery expert at CEL Solicitors.

‘Check to see what safeguarding measures your bank has in place when unusual activity is flagged, and what its compensation policy is. And whoever you bank or invest with, make sure they are regulated by the Financial Conduct Authority so your money is protected should the institution collapse.

6. What values does it stand by?

A bank may claim to be ethical but how does it demonstrate these values? And is that claim reflected in its culture? This includes everything from what it invests in, to its recruitment processes.

It may also be worth considering how diverse a bank’s leadership is and what this potentially says about its values.

‘If you want to know if your bank is reflective of the people it’s meant to serve, find out who are its board members and its senior management team,’ advises Umer Suleman, UK head of ethical investment at online platform, Wahed. Try Googling the board of directors of your bank and see how diverse it is — or isn’t.

7. Is it the planet’s friend or foe?

Every bank should publish its Corporate Social Responsibility initiatives and sustainability annual report, which include community and charitable work as well as ethical credentials. But there is often information hidden behind ethical claims, so it is worth doing further research.

Ethical Consumer is great for investigating specific products such as a particular cash Isa or savings account and it recommends what to buy and what to avoid. Meanwhile, Bank Track shares useful documents in its campaign to stop banks financing harmful business activities.

You might want to consider whether your bank invests in businesses that are involved in fossil fuels, arms, nuclear weapons or palm oil and deforestation, for example.

‘Prospective customers need to look further than just on a bank’s website to see how credible their ethical claims actually are,’ says Holly Andrews, MD at KIS Finance.

8. Where is my money being invested?

Understanding where your money is being invested can be a minefield, as one financial institution may have access to many products. The CIRCA5000 app pledges to invest with people and the planet in mind. You can pick your investment and clearly see the businesses you are funding, eg water sanitation in developing countries.

But according to Make My Money Matter, switching your pension to an ethical fund is 21 times more impactful than going vegetarian or giving up flying. The website has a template for customers to contact their pension provider to lobby them to go green.

9. What are its lending practices?

Banks have a choice on how to use customer deposits and who they lend money to, so study their lending practices.

‘The good news is there are an increasing number of banks using deposits to lend to, and finance, companies at the forefront of the climate battle, particularly those in clean tech and renewable energy,’ says Jessica Robinson founder of responsible investment tool Moxie Future.

Meanwhile, Triodos Bank claims only to lend money to projects that support people and planet.

10. Who is the bank owned by?

Change in ownership can affect a bank’s long-term approach to investment, so it is worth reviewing who owns yours.

‘For example, the Co-operative Bank has always taken the stance of ensuring that it invests in ethical sectors. However, they are now 100% owned by a giant American hedge fund. Therefore there is always the risk they may in time move away from their current investment strategies,’ explains Holly Andrews at KIS Finance.

If you want more tips and tricks on saving money, as well as chat about cash and alerts on deals and discounts, join our Facebook Group, Money Pot.

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