Getting the Best Accounts to beat the Banks
By Simon Read
The Supreme Court's ruling last week (25 November) that the Office of Fair Trading (OFT) can't rule on the fairness of unauthorised overdraft fees, came as a major blow to millions hoping to claw back excessive charges.(See: Bank’s shock win at charges battle).
But customers can still be winners by leaving their bank. Finding a better deal may not only pay you, but could also pay back your bank for its years of stinging you with high charges and fat fees.
But you'll only really beat the bank if you can find a better current account. And to do that you'll need to know what kind of current account you need and that will depend, of course, on how you use your bank account. Do you go into the red every month? If so, then you need an account with low charges.
Current accounts with low charges
Alliance & Leicester's Premier and Premier Direct current accounts, for instance, have no overdraft charges for the first 12 months, before rising to 50p per day up to a maximum of £5 per month.*
Meanwhile, Halifax's reward account charges a flat £1 a day. The fees will mount up if you don't climb out of the red, but you do know exactly how much you'll be charged.
Current accounts for the cash-rich
Do you keep a lot of cash in your account? Then you should consider choosing a bank that offers a decent interest rate on a credit balance.
At present, Alliance & Leicester's Premier Direct Current and the Abbey Current Account both pay 6 per cent AER on balances up to £2,500.*
Getting extras with your current account
Maybe you are attracted by the thought of lots of extras, such as travel insurance, linked to your account? Then paying a fee for a packed account could be worthwhile.
Halifax's Ultimate Reward Account, for instance, costs £12.50 a month and in return you'll get worldwide annual travel insurance (for a family of four), RAC breakdown cover, plus mobile phone insurance.
There's a free overdraft of £300, then interest is charged at 19.5 per cent. For credit balances the account pays 2.5 per cent.*
Are the extras worth having?
Are the extras worth it? You'll need to decide for yourself. If you're saving more than the cost of the account then it can work to your advantage.
Are you just interested in the service you'll get from your bank? If so, then ask around among your friends and family to see if any of them has had a good experience with their bank. FirstDirect has a decent reputation for service and often wins consumer awards, but the branch-free bank may not be for all and its accounts are hardly market-leading.
If you want to be able to visit your branch regularly then it may simply be the best idea to pick the nearest branch to your home or office, whichever bank it is.
Savings market set for change
Finally, next year mortgage customers of Abbey will be able to apply for its new Zero account which has no fees and an overdraft interest rate of just 12.9 per cent APR.*
With many banks charging nearer 18.9 per cent for an authorised overdraft the interest charges alone make the account look attractive and with many banks charging customers around £25 for a bounced cheque and other unauthorised activity on an account, then the Zero deal looks even more attractive.
Stay on the look-out for new deals
The massive, drawback, of course, is the need to have a mortgage with the Abbey - or Santander as it will be known from mid-January. Most people will probably make greater savings simply by choosing a better mortgage deal.
But the Zero acccount is an interesting new concept and it's likely that we will see more conditional accounts being launch by rival banks come the Spring. For that reason, whatever decision you make now, it's worth keeping an eye on new deals as the market looks set to become much more competitive in 2010.
*All rates correct as at 2 December 2009
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Get some top benefits from a new account - it’s easier than you think!
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