If you're paying vast overdraft fees, or earning no interest on a large current account balance, now may be a lucrative time to move.
Current accounts are a hot topic again, with the news that NatWest and RBS have cut their unarranged borrowing fees.
Amongst other cuts, customers can now expect to pay £5 for a returned cheque, direct debit or standing order, and the fee for going into unauthorised overdraft has now halved, to £15. It's certainly a start and hopefully all other lenders are taking note.
What do you want from your current account?
But fees and charges are just a couple of things we should be aware of with a current account. We should also think about how we use them so we can ensure we have the right one for us.
Ask yourself:
- What is your average current account balance?
- Do you ever go into overdraft?
- How important is customer service?
- Would you be happy to pay for banking?
If, for example you're regularly forking out for overdraft charges, or your huge balance earns no interest, your account isn't working for you.
Don't get stuck in a rut. If your account isn't meeting your needs, it could be time to switch.
High balance
If your account never dips below a few hundred pounds, even after covering bills and living expenses you need to earn a decent rate of interest.
The Alliance & Leicester Premier Direct account pays a market leading 6% AER (fixed for one year) on balances up to £2,500 (you earn 0.1% above that) plus you also get a 0% overdraft for one year.
You'll need to be 21 or over to qualify. You will also have to move all of your direct debits to the account, plus pay in at least £500 per month.
But the great news is, if you can get an existing Alliance & Leicester customer to recommend you, you'll each get £25.
Sister Santander bank, Abbey, also offers 6% for 12 months on its Preferred In-Credit Rate account on balances up to £2,500. However, it only offers a four month, interest-free overdraft, and you'll need to fund the account with £1k per month.
If you have more than £2.5k sitting in your current account, the Lloyds TSB Vantage account pays 3% AER on balances of £3k, and 4% AER on balances of £5-7k. But surely those of you who keep this much money in your current accounts must be few and far between?
Bare minimum and dip into overdraft?
If, like me, you keep just enough to cover bills and living expenses in your current account (any extra is swept into a savings account) then interest rates won't concern you. So check out the extras.
Alliance & Leicester pops up again with its Premier Current Account. Again you'll need to be at least 21 to apply, move all of your direct debits to the account and pay in at least £500 per month to qualify.
The interest rate is an unexciting 0.5% AER, but new customers do get free, annual European travel insurance worth £60 (upper age limit of 65 applies) and a 0% overdraft for 12 months.
And most interestingly, if you move to the Premier Current account and you'll currently get £100 for your trouble (plus, again, get an Alliance & Leicester friend to recommend you and you'll each get £25).
Sister bank, Abbey, also offers a £100 incentive to switch to its Preferred Overdraft Rate Account. Account details are similar to Alliance & Leicester's Premier account, except you need to pay in £1k per month, and you won't get free travel insurance.
Great customer service
However, steering away from interest and extras, an important feature of a current account for many of us is customer service. I for one expect prompt, courteous and helpful responses from knowledgeable staff. And sadly, in a bid to save a few quid this is where many banks fall flat.
But encouragingly, when we asked lovemoney.com readers their views on customer service, two banks actually did well. A whopping 93% voted for First Direct, and 89% reckoned Smile (and its parent bank, the Co-operative) were excellent or very good.
So what are these banks offering? First Direct's 1st current account is quite unusual. For a start, customers don't earn a penny in interest, no matter what their balance, but they do get a free £250 overdraft. On the downside, you'll need to pay a whopping £1,500 into the account each month to qualify (alternatively you can maintain a balance of £1,500 or pay £10 per month). Yikes.
However, like Alliance & Leicester, First Direct is currently offering £100 to anyone switching to the 1st account. But interestingly, in 12 months' time if you've obeyed the rules but aren't happy, it'll give you a further £100 to switch elsewhere. So this time, £200 is up for grabs!
If, however, you're looking for good customer service and an ethical current account, you'd do well to consider the Co-op's Current Account Plus. The Co-op works towards combating climate change, assisting communities and tackling global poverty. Its Current Account Plus offers a fee-free overdraft facility up to £200 and comes with a linked ethical savings account.
Frequent traveller
Regular travellers may be attracted to the Nationwide BS FlexAccount as you can use its debit card within Europe and pay no commission (most providers charge a 2.75% fee). And for use outside Europe, Nationwide only charges the Visa fee of 0.84%.
Paying for banking
And finally, if you're happy to pay for banking, packaged current accounts are happy to take your £10+ each month in exchange for benefits such as free travel insurance.
But if you have one, do calculate how much those extras actually save you to see if they're worthwhile. A travel insurance policy on a joint account that doesn't cover partners when travelling separately, for example, may be useless to you.
The Smilemore account (from Smile) tends to do well in surveys, although at £13 per month I'd want to make sure I was getting very good value for money. And HSBC is currently offering £50 to anyone switching to its Bank Account Plus, which comes with worldwide travel insurance and roadside breakdown assistance, among other benefits - but it costs £136 in the first year. Ouch!
Verdict
Clearly with so many different types of account there's sure to be one that suits your needs - you could save a fortune in overdraft charges, or earn a very good rate of interest on your money. And you could even make up to £200 just by switching.
Personally, I'd put customer service above any short lived cash incentive, and steer well clear of packaged accounts. How about you? What's the best incentive a current account provider could offer you? Share your thoughts using the comments box below!
Apply for a better current account at lovemoney.com
More: Don't get stung by bank charges |Don't pay a packet for a packaged account