Ditch your current account for a better deal

23 October 2009

We all know about the importance of moving our savings accounts on a regular basis and reviewing our insurance policies each year.

But many people still fail to review what is, arguably, the most utilised financial product – the current account.

But this apathy comes at a price. For a start, many providers currently offer zero interest to their current account customers. According to data provider Defaqto, offenders include: Barclays; Firstdirect; HSBC; Nationwide; and the Co-operative Bank.

In addition, many providers continue to tweak their charges – catching many customers out.

For example, from 6 December, Halifax and Bank of Scotland will start charging overdrawn customers £1 a day. This charge will replace overdraft interest and bank charges – but whereas a month spent £100 overdrawn would have previously cost under £2, it will now set customers back by as much as £31. People with overdrafts of £2,500 or more will be charged £2 a day.

Dominic Lindley, personal finance campaigner at Which?, says the £1 daily charge is equivalent to 365% APR if you’re £100 overdrawn. "Anyone who's unhappy with the new charging structure should vote with their feet by shopping around and switching to a current account that best suits their needs," he adds.

The past few years have seen packaged accounts – where you pay a monthly fee in return for an account with added extras – boom in popularity. But research from Which? reveals that these deals can cost as much as £300 a year, although many of the ‘benefits’ are just not worth this price.

Which? also found that 22% of its members with packaged accounts had been automatically upgraded by their bank.

David Black, head of banking at Defaqto, says anyone considering a packaged account ask themselves the following questions:

* Do you need the benefits?
* Are they of suitable qualify for you?
* Could you get them cheaper independently?

Insurance products offered as part of packaged accounts should also be scrutinised carefully. For example, if travel insurance is included check to see which areas it covers (the US might be excluded, for example), and whether it covers things like winter sports. There might also be an age limit, so check to see if this applies.

Some top current accounts

In-credit interest

Current account AER (balances
up to £2,500)
AER (balances
over £2,500)
Abbey 6% for 12 months
(then 1%)
0.1% Must deposit
£1,000+ per month

n/a n/a Earn £5 interest a month
provided you deposit
£1,000+ per month
Source: Defaqto 23/10/2009

Arranged overdrafts

Provider Authorised

Norwich & Peterborough

0% for six months
(then 11.74%)

 24.9% 0% on in-credt
balance  Cahoot  11.8% 21.9%

£100 interest-free overdraft
£1,000 maximum overdraft

Source: Moneyfacts 23/10/2009


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