Published: 07/04/2009

Whilst many of us will happily switch our credit card balance at the drop of a hat and shop around for a new mortgage deal each time our fixed rate expires, when it comes down to moving our current account it’s a completely different matter.

There are a vast array of current accounts to choose from, some come with enticing rates of credit interest with others offering a more competitive deal for those who sometimes dip ‘into the red’.

Despite the best efforts of the slick marketing departments at the banks and building societies, large numbers of us remain loyal to the current account that we opened when we left college or received our first pay cheque.

So what’s the reason for this misguided loyalty? Well, it seems that the main hurdles that providers have to overcome are consumer apathy combined with the perceived hassle involved in transferring your account to pastures new.

If you keep an average of £2,000 credit in your current account, you’ll receive a paltry £1.60 (after 20% tax) in interest for the entire year, yet if you currently held a similar balance with the Premier Direct account at Alliance & Leicester you’d receive £78.24 – starting to get interested now?

Another account worth a look is the new Reward Current account from Halifax which pays you £5 every month (yes £60 per year) as long as you pay in at least £1,000 per month.

Maybe you’re someone who spends more time overdrawn and therefore not too fussed with credit interest deals; however the ‘getting a poor deal’ theme is pretty similar. Rather than paying £90 per annum in interest for an average £300 unauthorised debit balance, you could slash the cost to less than £35 with the likes of Cahoot that is offering authorised overdrafts from as low as 11.8% EAR, on top of this you’d save yourself a fortune in unauthorised fees and charges.

If this has whetted your appetite and given you some inspiration to go out and find a more suitable current account, there are a few things you need to take into consideration:

• In order to receive some of the more competitive deals, you may be required to fund your account with a minimum amount each month; this typically varies from £500 up to £1,500 per month depending on the account you opt for.
• Beware of packaged accounts where eager bank staff will try to persuade you to opt for one of their accounts with add ons such as mobile phone insurance, car breakdown cover or travel insurance. This sounds quite an attractive proposition until you realise that you’ll have to shell out a monthly fee of anything from £6.50 to £25 for the privilege and realise that you could buy your cover cheaper elsewhere anyway.
• An account that offers a high rate of credit interest will often turn out to prove expensive for borrowing and vice versa, so opt for an account that fits your account usage.
• Whilst credit interest of 4% or more sounds appealing, don’t forget to check the small print as in many cases these attractive interest rates will only apply to the first £1,000 or £2,500 of your balance. The exception to this rule is the’ first’ current account from Coventry Building Society which pays 1.09% gross AER on credit balances right up to a whopping £250,000.
• It’s possible to receive financial incentives for transferring your current account, with First Direct offering a cash sum of £100 and Alliance and Leicester. So whilst there has been a general reluctance to change current account providers, the financial benefits of picking the right account certainly make it worth some serious consideration.

   

  Remember if you can’t be bothered to switch, it will be the banks profits that continue to benefit and that’ll be at your expense!

   

  Click here to find the best current account for your circumstances.