Make sure your bank is a flexible friend - not foe

We are spoilt for choice in the options for moving money around - whether increasing overdrafts, changing credit-card providers or just plain saving

The announcement this week that Egg, the online bank, now has almost 1.5 million customers shows our liking for different sources of financial services. We are certainly spoilt for choice. We can bank via the telephone, internet and TV as well as mobile phones. There are also a multitude of providers.

The announcement this week that Egg, the online bank, now has almost 1.5 million customers shows our liking for different sources of financial services. We are certainly spoilt for choice. We can bank via the telephone, internet and TV as well as mobile phones. There are also a multitude of providers.

However, one thing has not changed - the basics that help us to spot the best deal. With so much choice, it is even more important to be able to analyse the products so that we get the ones that best suit our needs. Here are a few pointers to help you decide:

Current accounts Most people regard a current account as the cornerstone of their finances. For convenience, or to save money, it certainly pays to shop around to get one that suits you. We are more likely to get divorced than change banks, because switching banks can be tedious.

Every main bank offers free banking - no charges for everyday transactions. Charges will be made for services you occasionally use ie £10 for stopping a cheque. However, it is the cost of overdrawing without permission that makes customers see red.

Most banks charge a monthly fee when this happens - typically £10-£15 - and charge a penalty interest rate of around 30 per cent. If you do occasionally dip into the red, arrange an overdraft and don't exceed its limit. You will then avoid these costs. It therefore makes sense to choose a bank that does not charge for arranging an overdraft - or even has one included in its basic current package. Also look at the interest rate charged.

Borrowing money The key to obtaining the best credit deal is either the Annual Percentage Rate (APR) or Equivalent Annual Rate (EAR).

The APR is the yardstick to help consumers spot the best credit deal for all credit except overdrafts. It incorporates the costs that have to be paid when borrowing - fees as well as interest. The general rule is, the lower the APR the better the deal. However, the APR is just one factor to consider when borrowing. Credit is like a telephone call - the total cost depends on timescales. As a rule of thumb, the total interest charge increases by a multiple of the years of a loan. If you borrow £5,000 over one year, you will typically pay around £500 in interest. Extend the period to three years and the total interest charge is £1,500.

The monthly repayments decrease the longer the period of the loan. Borrowing £5,000 over 12 months results in typical monthly repayments of around £460. This falls to around £180 when spread over 36 months. However, the moral is to borrow over the shortest period you can afford. The yardstick for overdrafts is the EAR. This only comprises interest; so do take into account any arrangement fee when deciding whether to borrow temporarily by an overdraft.

Credit cards Card issuers are going to extraordinary lengths to get us to take up their offers. Some offer low interest rates for transferring balances; others charge no interest at all for a period while others have an introductory rate. Always look beyond the teaser to the standard rate.

With plastic, inertia rules. It is so easy to make purchases on a whim, that little thought is given to the cost of borrowing. If you want to save money, it certainly makes sense to look at the offersavailable. The really keen consumer will take advantage of special offers on a revolving basis.

To maximise the period of any interest free credit, make major purchases immediately after your statement arrives. Keep tabs on your spending and ask before exceeding your limit. Having a transaction refused is embarrassing. Finally, make your monthly payments on time to avoid late payment fees.

Savings Everyone should have a comfort level of savings to cover emergencies. The exact level depends on individual circumstances. Ideally the sum should be at least three months living expenses. To make more of your money, look for the accounts with the highest AER (Annual Equivalent Rate). It illustrates what the pre-tax rate would be if the interest was paid and compounded each year.

Saver's Law explainswhy the same institution offers a host of different rates. Generally, the higher the balance and the longer the money can be left undisturbed, the higher the rate of interest paid.

Money, which you may need in an emergency, should be kept in an instant access or no notice account. Other funds can be placed in notice accounts so you can make more of your money.

Monitor rates monthly and move your money if you could do better elsewhere. However, be sensible. Unless you have large sums, it is not worth making changes for a fraction of a percentage point as you will forfeit interest while your money is being moved between organisations.

Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Voices
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
Sport
world cup 2014
Sport
Ray Whelan was arrested earlier this week
PROMOTED VIDEO
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
film
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
News
Mick Jagger performing at Glastonbury
people
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
Sport
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
News
business
Finacial products from our partners
Property search
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

    Business Analyst Consultant (Financial Services)

    £60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

    Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

    £60000 per annum: Harrington Starr: A leading provider in investment managemen...

    AVS, JVS Openlink Endur Developer

    £600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

    Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

    £30000 per annum: Harrington Starr: A global leader in trading platforms and e...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice