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.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
Life and Style
food + drink
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
News
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
News
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
Life and Style
Sexual health charities have campaigned for the kits to be regulated
healthAmerican woman who did tells parents there is 'nothing to be afraid of'
Life and Style
fashion
Arts and Entertainment
The John Peel Lecture has previously been given by Pete Townshend of The Who, Billy Bragg and Charlotte Church
musicGodfather of punk will speak on 'free music in a capitalist society'
News
peopleAt least it's for a worthwhile cause
News
Shoppers in Covent Garden, London, celebrate after they were the first to buy the iPhone 6, released yesterday
tech
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

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Quantitative Risk Manager

    Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

    Day In a Page

    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world
    Apple still coolest brand – despite U2 PR disaster

    Apple still the coolest brand

    Despite PR disaster of free U2 album
    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments