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."

The 67P/CG comet as seen from the Philae lander
scienceThe most important scientific breakthroughs of 2014
Arts and Entertainment
Ian McKellen as Gandalf in The Hobbit: The Battle Of The Five Armies
Arts and Entertainment
Sarah Koenig, creator of popular podcast Serial, which is to be broadcast by the BBC
tvReview: The secret to the programme's success is that it allows its audience to play detective
Ruby Wax has previously written about her mental health problems in her book Sane New World
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Marketing Services Manager - (communications, testing, DM)

    £32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

    Guru Careers: Finance Account Manager

    £Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

    Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

    £40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

    Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

    £45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

    Day In a Page

    Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Could cannabis oil reverse the effects of cancer?

    Could cannabis oil reverse effects of cancer?

    As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
    The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

    The Interview movie review

    You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
    Serial mania has propelled podcasts into the cultural mainstream

    How podcasts became mainstream

    People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
    Jesus Christ has become an unlikely pin-up for hipster marketing companies

    Jesus Christ has become an unlikely pin-up

    Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
    Rosetta space mission voted most important scientific breakthrough of 2014

    A memorable year for science – if not for mice

    The most important scientific breakthroughs of 2014
    Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

    Christmas cocktails to make you merry

    Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
    5 best activity trackers

    Fitness technology: 5 best activity trackers

    Up the ante in your regimen and change the habits of a lifetime with this wearable tech
    Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

    Paul Scholes column

    It's a little-known fact, but I have played one of the seven dwarves
    Fifa's travelling circus once again steals limelight from real stars

    Fifa's travelling circus once again steals limelight from real stars

    Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
    Frank Warren column: 2014 – boxing is back and winning new fans

    Frank Warren: Boxing is back and winning new fans

    2014 proves it's now one of sport's biggest hitters again
    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas