How to find the right current account for you
With complex features that can be difficult to compare, the CMA says that consumers simply aren’t switching their current account providers often enough to encourage competition.
As a result, banks with poor customer service have retained large shares of the market. This is despite the Payment Council’s Current Account Switch Service, which allows consumers to safely and reliably switch current account providers in seven days.
Dan Plant, consumer finance expert at MoneySuperMarket, says: “There has never been a better time to switch bank accounts, and now that the seven day switch is working most of the big barriers are gone. The key is deciding what features you want.”
According to the CMA consumers can see little difference between current accounts. So what are the factors that make one current account better suited to you than another?
David Mann, head of money at uSwitch.com, says: “At first glance, comparing current accounts may not bring up any clear distinctions as generally they perform the same function. But if you look a bit more closely at the overdraft rate, the interest on in-credit balances and any extra perks, you’re more likely to find an account suitable to you.”
Here are some of the things you can look for when comparing current accounts.
If you dip regularly into your overdraft, finding an account with lower charges could make a big difference.
Overdraft charges can be tricky to compare because they vary so much from bank to bank. Plant recommends adding up all of the overdraft fees and interest you’ve paid for the past three to six months, then calculating how much you would have paid with another account. That way you’ll have two simple numbers to make the comparison more clear.
He says: “If you’re after short-term respite you can get up to 12 months interest-free on your overdrawn balance, but be aware the cost will jump after the introductory period – often to very expensive rates.”
If your account usually has a positive balance, don’t be afraid to put that cash to work. While interest rates are low across the board, it’s always worth comparing what you currently earn to other offers. Some high-interest current accounts, for example, can pay up to five per cent interest.
Online banking has opened up a whole new world of ‘challenger’ banks, but some new entrants have very few bricks-and-mortar branches. If you prefer face-to-face banking, Mann recommends you check to make sure your new bank has branches across the country – including one convenient to you.
There are plenty of perks on offer to current account switchers, but be careful not to get sucked in.
Accounts can come with a range of enticements including travel insurance, breakdown cover, commission-free currency exchange and even cash. But according to Mann you need to check whether you’ll be expected to pay for some of these bonuses in the form of a monthly fee. Even if you are, it could still work out in your favour – if, for example, you travel and exchange currency frequently.
He says: “Whether you’re looking for a cash incentive to switch or a longer-term benefit such as interest on your balance, make sure you check carefully that the current account actually suits your needs.”