The answer to the question – like so many questions to do with the personal banking services we use – is really not so very different to the way we’d answer “what to look for in buying a new car”: namely, it all depends what you plan to use it for.
We’re slowly coming around to the idea that we don’t have to stay the rest of our working lives tied to the bank we first picked (probably by accident) when we were young. The world changes and our own needs and preferences change with it.
So, the first step in looking for a new current account is a frank and open review of what you do with your money.
- Is your account hardly ever out of the red?
- Are you horrified by the amount you pay in charges, but remain unclear about what you get for what you pay?
- Are you determined to avoid further interest charges?
- Do you want to maximise your savings and have credit balances work their best for you?
If the way you manage your money generally leaves you with a healthy, positive balance each month, then you’ll be looking for a current account that gives you the best return on that credit balance. If, on the other hand, you’re generally operating on a permanent overdraft, then you’ll be looking for an account that attracts as low a rate of interest as possible on such borrowing.
In the red or in the black?
If, perhaps, like the majority of people, your account fluctuates between a credit balance as soon as you’ve been paid and a negative balance as you near the next pay-day, then you’ll need to remember that the cost of borrowing far outweighs the return you’ll get on any credit balances at the beginning of the month. In that case, you’ll again be looking for a current account that minimises the cost of your running into the red.
You’ll find that some current accounts charge a fee each month, whilst many others do not. On the face of it, therefore, you might think such a monthly fee a complete waste of money. But it’s worth taking a second look to establish just what you get for the monthly fee. Perhaps the fee also provides free travel insurance, insurance on your mobile telephone or discounted loan rates. If you are in need of any of these, then a monthly fee to operate your account could be money well spent.
If you plan to be spending time overseas and will be using your current account debit card while you’re travelling, find out what charges you’ll pay for using your account when abroad.
What services will you need?
Of course, most current accounts these days will come with an internet banking facility. But make sure it offers the full range of services you’ll need – for example, some won’t allow you to set up, amend or cancel Direct Debits online, while some will allow banking via text on your mobile.
Will you need regular bank statements by post each month? Or are you content to manage your account via online statements only? It’s important to know what choices you’ll be given before you sign up to your new account.
Finally – and especially for those who generally operate their account close to the limit of any agreed overdraft – make sure you know what penalties you’ll face if you should ever stray beyond that limit into the “unauthorised borrowing” zone. Some unauthorised overdraft fees can be horrendously punitive and you’ll want to avoid them.
In a nutshell…
Looking for a new current account means reviewing the overall financial climate in which you manage your finances. It’s about:
- Minimising interest charges and fees;
- Maximising your returns on credit balances;
- Reviewing the additional services you’ll expect from the account, such as internet banking, travel abroad, account administration charges and unauthorised overdraft fees.
