Searching for the best bank deal

Fed up with your current account? You're not alone. Maybe it's time to think about making a move

We all need a bit of stability. No matter how fast our lives are moving and changing, most of us appreciate the little things we can depend on not to change - year after year. Is this why current accounts have become the comfort blankets of the financial world?

We all need a bit of stability. No matter how fast our lives are moving and changing, most of us appreciate the little things we can depend on not to change - year after year. Is this why current accounts have become the comfort blankets of the financial world?

According to a Mintel report, 83 per cent of consumers have not changed their current account in the past five years, and 50 per cent have never changed their account provider. However, 46 per cent said they were not satisfied with the value for money of their current banking arrangements, says the report, commissioned by the Virgin One account.

It is easy to see why. Even though most current accounts now pay interest on credit balances, the rates are pitiful. Most pay less than 1 per cent a year on balances of less than pounds 10,000. But could a new generation of Internet banks change all that?

The first Internet-based current account in the UK will open for business later this month. Smile, set up by the Co-operative Bank, offers 4 per cent gross interest a year on credit balances. And the bank says it will be able to sustain competitive interest rates.

"We're not offering loss leading interest rates," says Bill Eyres, Co- operative Bank spokesman. "It's based on the costings of the bank and how much it costs to run." Banks with branches have the highest costs, those with telephone centres are cheaper, but Internet banking is the cheapest, says Mr Eyres.

There is no doubt Internet banks will be able to offer good value, but for now the majority of customers will stick with the more traditional accounts. Most people still do not have access to the Internet, others are wary of the new technology and many want to deal with bank staff face to face.

But it may still be worth shopping around for a better deal on your current account. Interest on credit balances is very low at most current account providers but there are exceptions. Citibank pays 2.5 per cent gross per annum on balances over pounds 2,000, and, for students Halifax pays 2 per cent on credit balances.

However, terms for overdrafts vary widely. Although you have to put up with a branch network of only three, Citibank charges no fee or interest on an overdraft of up to pounds 500. Borrowing on this level would cost pounds 94 a year at Lloyds TSB. Other banks, including the Co-operative, Barclays and NatWest offer an overdraft buffer, waiving charges and interest if you dip into the red for three working days or less each month.

Being charged for using a cash machine, or worse - being unable to use the only one around - are annoyances most of us could do without. So access to a wide range of ATMs is an important feature. Many accounts now offer cards which allow free cash withdrawals at any of the 25,000 machines displaying the Link logo. But at Abbey National, access is only free at 6,800 machines, and with Woolwich at 550 terminals.

So why are we so reluctant to ditch our current account in favour of a better one? Many people believe it is good to build up a long-standing relationship with their bank. If the going gets tough, this loyalty may work in their favour, they reason. But is this a delusion? Certainly many banks are under more commercial pressure, and the traditional bank manager's relationship with account holders is no more."Customers think if they keep their bank account nice and tidy for a long time the bank will help them. But that's a very old-fashioned attitude," says Julie Lord of financial planners Cavendish Financial Management in Cardiff. "The real reason people don't move accounts is the hassle factor," she says.

The more regular automated payments going into or coming out of your account, the more trouble it will be changing providers. "Even those who have made the switch... report nightmare after nightmare," says Ms Lord. For example, errors in transferring direct debit s can lead to insurance premiums being unpaid.

But a new pilot scheme launched this month could change all this. The new direct debit transfer system aims to make it easier for customers to move direct debits and standing orders from one bank account to another. The system enables a customer's new bank to receive a list of payments from the old bank, and do all the legwork itself.

Only Abbey National, the Co-operative Bank, Halifax, Ulster Bank, Virgin One and Woolwich are fully involved in the pilot and will do the work for you. But under the scheme all UK banks will now give customers a list of their current direct debit and standing order arrangements.

This makes the change smoother, but switching accounts is still an upheaval. "If you are broadly happy with your current account and it pays you a bit of interest, stick with it," says Julie Lord. "You shouldn't be keeping huge amounts in a current account, so the fact that it doesn't pay much interest shouldn't be of much relevance."

Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Arts and Entertainment
The sight of a bucking bronco in the shape of a pink penis was too much for Hollywood actor and gay rights supporter Martin Sheen, prompting him to boycott a scene in the TV series Grace and Frankie
tv
Sport
footballShirt then goes on sale on Gumtree
Voices
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvName confirmed for third series
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
art
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Abuse - and the hell that came afterwards

    Abuse - and the hell that follows

    James Rhodes on the extraordinary legal battle to publish his memoir
    Why we need a 'tranquility map' of England, according to campaigners

    It's oh so quiet!

    The case for a 'tranquility map' of England
    'Timeless fashion': It may be a paradox, but the industry loves it

    'Timeless fashion'

    It may be a paradox, but the industry loves it
    If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

    Could have done with Osama bin Laden staying alive?

    Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
    New exhibition celebrates the evolution of swimwear

    Evolution of swimwear

    From bathing dresses in the twenties to modern bikinis
    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine