Deal of the week: Fed up with overdraft fees? This could be the account for you
Every week Moneywise’s product researcher Tom Wilson picks out his favourite deal. This week – Virgin Money’s genuinely fee-free current account.
What’s the deal?
Virgin Money’s Essential Current Account is designed to help people kick an expensive overdraft habit. It’s free to use, and it won’t clobber you with fees and interest charges as it won’t let you go overdrawn.
Why should I care?
If you find it difficult to keep your finances in check, this account could save you a small fortune. One in four people have borrowed beyond their overdraft limit, and they’ve been charged £1.2 billion in the process, according to a recent report from the Competition and Markets Authority.
Virgin isn’t the only bank to offer a no overdraft account, also known a basic account, but it uniquely pays 1% interest on in-credit balances up to £100,000. Its peers pay nothing at all.
What’s the catch?
I’m struggling to find it.
Some banks only offer basic bank accounts to people who don’t qualify for another account, but Virgin’s Essential account is available to anyone on request.
Some banks also force people onto accounts with monthly charges once they’ve got back on top of their finances, but Virgin doesn’t do that either.
Virgin does say that only “some” services are available via phone or online banking, but the basics are covered.
What are my other options?
Most of the high street banks offer some version of basic bank accounts, including the following:
- Co-operative Bank
- Lloyds Banking Group (includes Lloyds, Bank of Scotland and Halifax)
- Clydesdale Bank (and Yorkshire Bank)
- RBS Group (includes RBS, NatWest and Ulster bank) brands)
However, you won’t get interest on in-credit balances anywhere else.
Where can I find out more?
Visit a Virgin Money branch, or virginmoney.co.uk.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
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.
A no-frills vanilla bank account that allows you to have your salary paid in, to set up direct debits and standing orders for money going out and online access, but won’t allow you an overdraft, cheque book, interest earned on the balance or paper statements.