Five questions about: The OFT and current accounts

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The Independent Online

What has the Office of Fair Trading (OFT) said about current-account charges?

The OFT has been investigating the current-account market since 2007 and was involved in a court case with the banks over whether or not unauthorised borrowing charges are fair. It lost the case, which meant it couldn't force banks to reduce their fees, but this week it called for greater transparency. It wants customers to be able to opt out of being able to go overdrawn without permission, and for banks to improve the way they treat customers who are in financial difficulty.

What does this mean for refund claims?

More than one million people put in claims to have their bank charges refunded, but following the ruling in the Supreme Court last autumn, which found in favour of the banks, most of these claims are likely to be turned down. This week's proposals from the OFT won't change this.

What would it mean if I chose to opt out?

If you exceed your overdraft limit or go overdrawn without permission, your bank will honour payments (up to a point), but you will probably be charged a higher rate of interest and incur penalty fees. These fees can quickly rack up. Therefore if people are able to tell their bank that they don't want to be able to go over their limit, it could help them stay in control of their finances. However, it could mean that you have payments declined for important bills due to insufficient funds. In turn, you could still incur penalty fees (from your mortgage or credit card provider, for example), and missed payments could have a negative impact on your credit file.

What does this mean for the current-account market?

It's no longer the case that current accounts are all the same. Banks and building societies now have wider product ranges to suit different customers. It is therefore well worth doing some research to find the right account for you.

How do I switch my account?

Most providers now have dedicated switching teams that will arrange the transfers of your direct debits, standing orders and salary for you.

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