Money Insider: Confusion that means bank customers are staying put

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.

ahagger@moneynet.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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

    Guru Careers: Pricing Analyst

    £30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

    Guru Careers: C# Project Team Lead

    £55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

    Day In a Page

    Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

    The 161-page dossier that exposes Fifa's dark heart

    How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
    Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

    Exclusive interview with Tripoli PM Khalifa al-Ghweil

    'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
    Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

    Raymond Chandler's Los Angeles

    How the author foretold the Californian water crisis
    Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

    Art attack

    Chinese artist who posted funny image of President Xi Jinping facing five years in prison
    Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

    Cher is the new face of Marc Jacobs

    Alexander Fury explains why designers are turning to august stars to front their lines
    Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

    'I'm climbing Ben Nevis for my daughter'

    Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
    10 best wedding gift ideas

    It's that time of year again... 10 best wedding gift ideas

    Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
    Paul Scholes column: With the Premier League over for another year, here are my end of season awards

    Paul Scholes column

    With the Premier League over for another year, here are my end of season awards
    Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

    Liverpool have seen too much tragedy to forget Heysel

    Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
    Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

    Khan’s audition for Mayweather may turn into a no-win situation

    The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
    Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

    Blundering Blair quits as Middle East peace envoy – only Israel will miss him

    For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
    Fifa corruption arrests: All hail the Feds for riding to football's rescue

    Fifa corruption arrests

    All hail the Feds for riding to football's rescue, says Ian Herbert
    Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

    The Kurdish enclave still resisting the tyranny of Assad and Isis

    In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
    How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

    How I survived Cambodia's Killing Fields

    Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
    Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

    How Stephen Mangan got his range

    Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor