Banks behaving badly: the latest tricks you should know about
As if slashing savings rates wasn't bad enough, high street banks are now tightening their current account belts.
NatWest and RBS are the latest two to ditch their in-credit interest rates on current accounts, following in the footsteps of Barclays, HSBC and the Co-operative Bank.
According to Moneyfacts, more than half of the current accounts on the market pay no in-credit interest on balances, and almost a third pay less than 0.1%.
Instead, these banks lure customers in with preferential rates on overdrafts, often allowing a generous interest-free buffer.
Nothing in return
As most people bank with one of the bigger banks, it means monthly salaries miss out on a substantial chunk of interest.
And for the current accounts that do offer an in-credit interest rate, customers have to jump through a confusing set of hoops to earn anything at all.
Both Lloyds and Halifax offer 'reward' current accounts that pay a higher rate of in-credit interest, providing you pay in £1,000 a month and stay in credit.
But for basic current accounts, Lloyds pays zero on in-credit balances - and Halifax pays nothing on its standard current account.
Santander has also put an end to paying interest on in-credit balances for some of its current accounts.
To top this off banks are also edging towards paid-for accounts, with more so called 'packaged' accounts on the market than there are fee-free current accounts.
While packaged accounts aren't necessarily bad, they do charge customers a premium for 'benefits' they often don't use.
The general rule of thumb is to work out the benefits you are likely to use, check out their terms and conditions and how much they would cost if you paid for them separately.
If you are likely to take advantage of three or more benefits then the packaged account could be a good option for you.
But watch out for unnecessary add-ons such as identity theft protection, which banks are obliged to provide anyway.
Clearly banks haven't learned many lessons from the credit crunch and are still trying to take customers for a ride - make sure you're not one of them and keep a close eye on your accounts.
A current account that charges a monthly fee in return for a “package” of additional services, such as travel insurance, credit card protection, mobile phone insurance, identity theft insurance, car breakdown cover or a “concierge service” that will book airline and theatre tickets or restaurant tables. However, many consumer experts say the features are overpriced and that more competitive deals exist elsewhere in the market and that very few packaged account holders actually take advantage of the features.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.