12:58 06 January 2013
Many of us stick with our current accountfor years, despite being bitterly dissatisfied. For example, you may have built up a considerable balance on which you are earning no interest. Or perhaps you have been overdrawn and been paying through the nose in fees and interest?
Alternatively, you could just be sick of your bank's second-rate customer service.
If this or any other complaint rings true for you, the start of the New Year is the ideal time to vote with your feet and switch to a better bank account. Here we take a look at the best deals out there according to your circumstances.
"I have a healthy balance but am earning no interest"
If you have built up balance in your current account it's likely to be earning a miniscule rate of interest - if any at all. The traditional first port of call would have been to transfer the money into an easy access savings account where returns would be more fruitful.
But savings rates have been sliding into oblivion in recent months and weeks, and now even the best of these accounts pays less than 2.5% (and that's before tax).
Meanwhile however, some current accounts have become much more appealing for those with larger balances. Santander's 123 current account, for example, pays an Annual Equivalent Rate (AER) of 1.00% interest on credit balances of £1,000 or more - that's on the entire balance from £0.
As soon as your balance hits £2,000 or more, you will earn interest of 2.00% on the entire balance. And when it reaches £3,000 you will earn 3.00%. This higher 3.00% rate applies all the way up to £20,000 (no interest is paid on anything surplus to that), so it can make really good sense if you maintain a particularly large balance in your account.
The 123 account also pays cashback of 1.00% on any spend on water and council tax bills that come out of the account - as well as on repayments (up to £1,000) on a Santander mortgage. This cashback rises to 2.00% of spend on electricity and gas bills, and 3.00% of spend on mobile, home phone, broadband and paid-for TV packages.
Both interest (which is calculated on a daily basis) and cashback are paid directly back into your 123 account on a monthly basis, starting from the first statement date after the account is opened. However, this account does come with a £2 monthly fee.
In-credit customers should also look at Lloyds TSB as you can add a Vantage facility to its Classic, Silver, Gold, Platinum and Premier accounts. Once in place, balances of between £1 and £1,000 will earn 1.50%, while if there's between £1,000 and £3,000 stored in your account, you will earn a rate of 2.00%. Account balances of between £3,000 and £5,000 will generate a maximum 3.00%.
However, there are catches to the system. For example, you will only be eligible to add Vantage if you pay in at least £1,000 a month to your account and - of course - stay in credit. Also, no interest at all paid is on amounts above the £5,000 level.
For those in credit on a more modest basis, it's worth looking at the recently-launched FlexDirect account from Nationwide. This will pay an AER of 2.00% for the first year on balances up to £2,500. Thereafter, the account pays a still well-above-typical 1.00% variable on credit balances though you won't earn any interest on balances over £2,500.
You must pay £1,000 a month to qualify for the new Nationwide account, or you'll be hit with a £5 a month 'under-funding charge'. Eligible customers are also offered a three-month fee-free overdraft but after this time, authorised borrowing will be charged at £1 per day, with a maximum charge of £20 per month, while unauthorised borrowing is charged at £5 per day, capped at £60 per month.
The Reward Current Account from Halifax doesn't pay interest at all - but provided you pay in a minimum of £1,000 a month, you will receive £5 a month, and that's regardless of whether you are in credit or overdrawn.
If you are regularly in the red though, this account may not be suitable. Back in November 2012, the costs of being overdrawn with Halifax took a sharp turn upwards. You can read more detail about this in the article I wrote at the time, but in short, you will be most susceptible if you are around the £2,000 overdrawn mark. This is because if you go beyond this threshold, charges will effectively double.
"I end up overdrawn every month"
There are accounts on the market that are more suitable for those who dip into the red, as charges and annual percentage rates (APRs) are relatively low.
First Direct's 1st account for example, offers 0% on overdrafts up to £250, which could be a handy feature if you end up dipping into the bank's money every month. If you go beyond £250, an overdraft rate of 15.9% APR will apply, which is actually quite competitive compared to other banks.
The 1st account pays nothing at all on credit balances but if you switch to First Direct from another current account provider, it will give you £100 cashback to say thank you. You will need to pay in £1,500 a month to qualify.
Alternatively, The Co-operative's Current Account Plus provides a temporary fee-free and interest-free overdraft of up to £1,000 for the first three months from switching. It also offers a longer-term £200 fee-free buffer. Interest on agreed overdrafts is charged at the same rate as First Direct at 15.9%.
"I am fed up with the customer service at my bank"
Many of us have current accounts that are neither regularly in the red, nor housing a hefty credit balance, but we will still be in regular contact with our current account provider. For such people, service is often the most important consideration.
It's worth nothing then that First Direct, which is part of HSBC, currently stands out in the crowd in those stakes. In 2011, the bank won the MoneySupermarket Supers award for Best Overall Provider. And First Direct is so confident of its customer service abilities that if you are unhappy with either the switch or the service, it will even pay you a further £100 if you decide to leave.
Keep your eyes peeled however for who's won in the 2012 Supers Awards, which will be announced on January 10, 2013.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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