Get current with your account…
Switching is all the rage these days. Whether it’s your gas bill, credit card or mobile phone contract, most of us are now savvy enough to know that we need to shop around for a good deal.
When it comes to our current accounts however not many of us think about whether we’re getting a fair deal, let alone a good one.
As a result, we either end up losing out – sometimes to the tune of hundreds of pounds – by sticking with a low interest rate, or we end up getting stung with very high rates on our overdraft facility, which can be around 18% or more.
If you know the cash in your account is going to be topped up regularly or increase steadily over time, then you need to take advantage of a high interest rate while your account is in the black.
The recent Bank of England base rate increase is good news for savers, so you should be able to find a good deal.
If you’ve got a good balance you may even find that some current accounts offer a better interest rate than your savings account.
Watch out though as some interest rates may only be on offer for a set period of time, for example six months after you open the account. Others may apply until you have reached a certain amount in your account, for example £2,500.
Need a little help
If by the end of the month things are usually a little tight then agree an overdraft limit with your current account provider. They’ll know how much comes in and goes out and should be able to recommend a suitable limit to start with.
Some accounts automatically let you go overdrawn by a small amount (for example, £50) without charging. But if you go overdrawn without agreement you’ll normally be charged interest on the amount – and a fee on top.
In addition, the bank may refuse to pay your cheques or direct debits and will probably charge you for ‘bouncing’ (refusing) them. The fees can be as much as £35 per failed payment and you may have to pay an administration fee on top.
While some accounts may offer overdrafts on an interest free basis until you hit an agreed sum, others may provide an overdraft rate for a set period of time, particularly if it is part of an introductory offer to entice you in.
Good things do not always come in packages!
Packaged accounts are very popular because they offer products such as free annual travel insurance, commission-free holiday money, discount deals with leisure firms and breakdown insurance in return for a monthly fee.
But you need to carefully weigh up the benefits before taking out a packaged account as many fee-free accounts can offer as good a deal. Plus often you find that you don’t use the perks anyway.
The average credit interest paid on accounts is not particularly impressive at around 1.5 per cent so you must really value the added extras to make the fees worth it.
Loyalty is not always rewarded
A bank will not always return the loyalty you show it by sticking with them over a long period and you could be missing out on the great deals which are currently available.
Look at it this way – you may well feel more secure with a familiar bank, but do you really want to pay hundreds of pounds every year for that feeling? That is ultimately what you are doing by not shopping around and making the most out of the competition.
There are deals out there offering up to 5% credit interest on a current account so switching banks could mean great savings. We can help you find the best current account for your financial needs and lead you through the switching process which can be completed in a just a couple of days.