Warning over multiple bank accounts for switchers chasing bonuses | Personal Finance | Finance

Bank customers chasing switching bonuses and cashback deals are being warned that opening too many current accounts could backfire.

With banks locked in an aggressive battle for customers, millions are being tempted to juggle two, three or even more current accounts to scoop up cash incentives and perks.

But consumer experts say there are pitfalls that switchers need to watch out for.

MoneySavingExpert says there is no rule preventing people from holding multiple current accounts – either with the same bank or across several providers.

Different accounts offer different benefits, from cashback on household bills and interest on balances to travel insurance and fee-free spending abroad. Many also dangle one-off cash bonuses for new customers.

However, the site founded money guru Martin Lewis warns that opening several accounts in quick succession can trigger multiple hard credit checks, temporarily knocking a person’s credit score.

It also cautions that having more than one overdraft can make finances appear overstretched, particularly if several are used at the same time.

The site stresses that while simply holding multiple accounts does not automatically harm credit scores, misuse of overdrafts or rapid-fire applications can raise red flags with lenders.

There are also practical issues. Some current accounts require minimum monthly deposits or a set number of direct debits – conditions that can be easily missed when accounts pile up.

Meanwhile, GoCompare says having more than one current account can be useful for budgeting – for example, separating bills, everyday spending and savings.

It says additional accounts can also act as a financial safety net if a debit card is lost or an account is frozen due to suspected fraud.

But GoCompare warns that spreading money too thinly makes it harder to keep track of balances, increasing the risk of missed payments, fees or fraud.

It advises switchers to apply slowly rather than opening several accounts at once, to avoid damaging their credit profile.

Another issue is protection if a bank collapses. GoCompare notes that the Financial Services Compensation Scheme protects up to £85,000 per person, per banking group – meaning money above that limit held with the same institution would not be covered.

For savers with larger sums, spreading money across different banks can increase protection – but only if accounts are carefully managed.

Rebecca Goodman, personal finance expert quoted by MoneySavingExpert, said the rewards on offer can be attractive but warned consumers not to rush in.

She said: “The current account market is extremely competitive, with providers trying their hardest to attract and retain new customers.

“This means it’s possible to get a wide range of rewards when you sign up to a new current account, from cash freebies to access to exclusive savings accounts.

“But before you apply for a new account, it’s well worth researching how much you need, if it will actually save you money, if there are any fees to pay, and if you’ll meet the requirements for the account in the first place.”

Both MoneySavingExpert and GoCompare say multiple accounts can work well for disciplined switchers – but only if balances, fees and overdrafts are tightly controlled.