Money Insider: Confusion that means bank customers are staying put
Saturday 23 June 2012
Last week Lloyds TSB announced a raft of changes across its range of current accounts, including packaged accounts which already come with a monthly fee. Some of the pricing changes were positive whereby customers are given a little more leeway before being charged fees or interest on planned overdrafts. For example on the no-frills Classic current account, an interest and fee-free buffer of £25 will be introduced from 2 October.
The downside is that the overdraft interest rate is going up from 19.28 per cent EAR to 19.94 per cent and the monthly overdraft fee is being increased from £5 to £6.
Although this type of tweaking of rates, fees and allowances isn't anything new, the baffling array of different overdraft charging structures used by banks and building societies makes the task of finding the best account far from easy.
With some banks charging you interest on the amount you borrow, others charging a "more transparent" (but often more expensive) daily fee and Lloyds TSB charging a combination of a monthly fee and daily interest, it's no wonder that consumers haven't got a clue what's the best option for them.
There's not one bank that's cheapest for overdrafts in all situations. Factors including the amount you're in the red and the number of days you use your agreed limit.
For example if you are overdrawn by £250 for a full month, you will pay £25 (£30 less £5 monthly rebate) net in charges with the Halifax Reward current account and £9.73 with Lloyds TSB Classic Account (from October).
However, if you bank with First Direct (minimum £1,500 monthly income required) the first £250 borrowed is free of interest charges or fees.
If you are £500 overdrawn for just two days during the month the Halifax Reward current account is a far better option in that you will pay a £1 daily fee for each of the two days but will receive your £5 monthly rebate, so in effect will have paid nothing. In the same situation, the First Direct overdraft would cost you 22p and with Lloyds TSB Classic account £6.52.
Selecting the most appropriate current account isn't just about how much an overdraft costs or how much interest you'll earn on credit balances.
There's another area to consider these days, namely the charges levied when using your debit card abroad.
Most banks and building societies will charge you a foreign transaction fee of 2.75 per cent on each cash withdrawal and purchase made by debit card, with a few banks also charging an additional transaction charge of between £1 and £1.50 per purchase.
if you use your card to spend £1,500 during your two-week holiday overseas, in most cases you'll pay at least £41.25 in foreign charges and even more with some banks that sting you for transaction fees on top. Compare this with the interest return you can earn on your current account. If you had a credit balance of £2,000 in a Lloyds TSB Classic Account with Vantage, which pays a competitive 2 per cent at this level, even if you manage to maintain this size balance for a whole year, your interest return after basic rate tax amounts to just £32.
If you've got a balance of between £3,000 and £5,000 the rate increases to 3 per cent, yet another option to factor into the equation.
Debit cards that don't levy a charge for overseas transactions are pretty rare, but if you are a frequent overseas traveller, take a look at the Gold Classic current account from Norwich & Peterborough Building Society, where you get free overseas debit card transactions as part of the deal.
You only need to pay in a minimum of £500 per month to qualify for the free bank account, which is much less than with many competitor accounts. Alternatively you could consider the debit card with no foreign usage charges from Metro Bank.
It's no wonder that the number of people switching bank accounts remains at such a low level.
Despite the promise of instant cash hand-outs, confusion reigns and many customers stick with their existing bank, despite there being better value options out there.
There has been talk of providing portable account numbers so that people can switch accounts in just a few days. However, until there's a way that people can simply work out the best home for the way they run their bank account, this portability won't make a jot of difference.
bank account customers are seeking more clarity, not more speed.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Olympic diver has made his modelling debut for Adidas
- 2 Scottish independence: Learn from Quebec's mistakes and beware of promises. Vote Yes.
- 3 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 5 Hitler’s former food taster reveals the horrors of the Wolf’s Lair
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Portuguese academic says British are 'filthy, violent and drunk'
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
iJobs Money & Business
£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
£20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...
£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...
Day In a Page
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony