Current account competition heats up

Current account head line rates are increasing by up to six per cent before tax as provider’s battle it out in a competitive market.

Traditional high street savings banks often offer as little as 0.1 per cent on savings.

But for those happy to swap their local branch for an online portal or telephone this can increase dramatically ñ and now traditional high street banks are boosting their accounts to claw back customers.

Best of the online accounts include Cahoot, who pay 3.12 per cent after 20 per cent savings tax (3.9 per cent) and Smile who pay 2.64 per cent (3.3 per cent).

New ‘hybrid’ accounts requiring initial set up online but thereafter allowing you to use telephone and branch enquiries are now emerging, such as the Lloyds TSB Classic Plus offering 3.2 per cent (four per cent).

Top of the new branch based accounts is Abbey’s Current Account, paying 4.8 per cent (six per cent), and also includes telephone and internet banking. The rate falls to two per cent above £1,000 savings however.

Alliance and Leicester’s new Premier Direct online account offers a headline rate of four per cent (five per cent before tax) until 2006, although this is only payable up to £2,500, when the rate drops to 0.08 per cent (0.1 per cent), and doesn’t offer branch facilities.

Nationwide offers 2.4 per cent (three per cent) and Halifax two per cent (2.5 per cent) although both require a minimum of £1,000 to be deposited monthly. Both can be run online, over the phone or in high street branches.

All carry harsh charges on unauthorised overdrafts however, paying as much as 28 per cent interest and £25 pound one off charges for withdrawals over an overdraft limit.

© Adfero Ltd

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