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Switching to an Online-Only Bank? 5 Things to Know
App-based banks promise slick budgeting tools and low fees, but they are not all the same. Here are five things to check before you move your everyday banking.
Online-only banks have become a mainstream choice in the UK. Many people now open an account in minutes on their phone and manage everything through an app, from spending alerts to savings pots.
Moving your main account is still a bigger step than downloading a new app. Your salary, bills and day-to-day spending all depend on it working smoothly.
Before you switch, it is worth checking five points. They help you understand what kind of provider you are joining, what you might lose compared with a high street bank, and how to move without missing a payment.
1. Check whether it is a bank or an e-money firm
Not every money app is a bank. Some providers hold a full UK banking licence. Others are e-money institutions or payment firms, which are regulated by the FCA but cannot call your balance a deposit.
The difference matters for protection. With a licensed bank, eligible deposits are covered by the FSCS up to £120,000 per person. With an e-money firm, your money is safeguarded instead. That means it must be kept separate from the firm's own funds, but it is not FSCS-protected.
If an e-money firm fails, getting your money back can take longer and may not be in full. Check the provider's status on the FCA Register before you move your salary.
2. Use the Current Account Switch Service if you can
If your new provider is part of the Current Account Switch Service (CASS), switching should be free and take seven working days. You choose the switch date with your new provider.
The service moves your direct debits, standing orders and incoming payments, then closes your old account. Payments sent to the old account by mistake are redirected automatically, and the sender is told your new details. If something goes wrong, the guarantee says any resulting interest and charges are refunded.
Not all app-based providers offer a full switch. Some only offer a partial switch, where you keep your old account open and move payments yourself. That takes more care, so list every regular payment before you start.
3. Think about cash, cheques and other everyday needs
With no branches, everyday tasks can work differently. Paying in cash is usually done through the Post Office or a shop network such as PayPoint, and some providers charge a fee or set a monthly limit.
Cheques may need to be paid in by photo in the app, by post, or not at all. Check limits on ATM withdrawals too, especially abroad.
If you are self-employed, get paid in cash or still receive cheques, these details can matter more than the app's design. A second account with a high street bank can fill the gaps.
4. Check how customer support works
Most online-only banks offer support through in-app chat, with phone lines that vary by provider. That works well for routine questions, but it is worth knowing how to reach a person quickly if your card is lost or a payment looks like fraud.
Like any bank, app-based providers may restrict or freeze an account while they carry out security or anti-money-laundering checks. If that happens to your main account, you could be without access to your salary for a while.
Look at recent reviews of the provider's support, and check that it is covered by the Financial Ombudsman Service if you need to escalate a complaint.
5. Compare fees, overdrafts and savings features
Many online-only accounts have no monthly fee, but paid tiers with extra features are common. Check what the free plan includes and what you would actually pay for, such as card spending abroad or cash withdrawals above a limit.
If you rely on an arranged overdraft, compare the interest rate and whether the new provider offers one at all. Approval is not automatic and depends on a credit check.
Savings pots are a popular feature. Some are held by the provider itself, while others are run with a partner bank. That affects which firm your FSCS protection is with, so check the details if you keep large balances.
Before you switch
An online-only account can be a good everyday choice, as long as you know what sits behind the app. Confirm whether the provider is a bank or an e-money firm, whether it uses the full switch service, and how it handles cash, support and overdrafts.
If you are unsure, you do not have to move everything at once. Many people open the new account alongside their existing one and switch fully once they are comfortable.
This article is for general information only and is not financial advice. Product terms vary, so always check the provider's own conditions before switching.
Sources
Claudio Tuteri
· Senior Finance Editor
