Has Coventry got the right combination?

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The Independent Online

The current account war shows no sign of abating.

Coventry building society, a comparative minnow in the UK's financial services industry, has fired yet another shot with a new combination current and savings account.

It offers an underlying savings rate of 4.25 per cent - more than many mainstream separate savings accounts - and, for the current account side, a £250 interest-free overdraft.

Customers, who get a Visa debit card for purchases and withdrawals, must pay in £1,000 a month but that can be withdrawn immediately.

It also has a special one-year savings deal. On top of its underlying 4.25 per cent rate, it is offering a bonus of 0.85 percentage points that takes it to 5.1 per cent. This, it says, equates today to a guarantee of 0.6 percentage points above the Bank of England base rate.

Any Bank of England rise will be matched in your rate, the building society says. If there's a fall, it will make a decision at the time.

So where are the strings?

If you fail to pay in £1,000 in any month, you only get 0.01 per cent plus the 0.85 per cent bonus in the following month, instead of the 4.25 per cent underlying rate plus the bonus.

If you breach the £250 overdraft limit, you'll be charged for an unauthorised move - a flat- rate £25 fee that cannot be levied more than once per month.

Nick White from the Uswitch.com price-comparison service says Coventry has introduced a "great innovation" to the market.

"It makes life easier for consumers by offering one combined account," he says.

The absence of tiered interest rates means consumers won't need to keep moving their money around in order to qualify for preferential rates, he adds.

But the account may not be suitable for someone who requires an overdraft as the £250 facility is a small one, says Mr White.

Sue Hannums from independent financial adviser (IFA) Chase de Vere suggests it may be best suited to the "financially savvy" who have a lot of savings and no debt.

"Those who are less disciplined would be better off keeping their savings account separate from their current account," she says. "If not, you may be tempted to dip into your savings - especially as there is a card facility. A savings account should be there as a nest egg or for a rainy day."

For those who do want to keep their accounts separate, Ms Hannums recommends Alliance & Leicester, which offers 5 per cent on balances up to £2,500 in its current account and 5.15 per cent on its online savings account.

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