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; request a free guide on NISAs from Hargreaves Lansdown

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Arts and Entertainment
Rosalind Buckland, the inspiration for Cider with Rosie died this week
booksBut what is it like to be the person who inspires a classic work of art?
Life and Style
techApple has just launched its latest mobile operating software – so what should you do first?
News
A male driver reverses his Vauxhall Astra from a tow truck
newsThe 'extremely dangerous' attempt to avoid being impounded has been heavily criticised
PROMOTED VIDEO
Arts and Entertainment
Lionel Messi in action for Barcelona
filmWhat makes the little man tick?
Arts and Entertainment
tvReview: An undercooked end (spoiler alert)
News
i100
Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
Sport
Cesc Fabregas celebrates his first Chelsea goal
footballChelsea vs Schalke match report
Arts and Entertainment
Toby Jones (left) and Mackenzie Crook in BBC4’s new comedy The Detectorists
tvMackenzie Crook's 'Detectorists' makes hobby look 'dysfunctional'
Life and Style
fashion

Olympic diver has made his modelling debut for Adidas

News
i100
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 Recruitment Consultant Birmingham

    £18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Recruitment Consultant - Soho - IT, Pharma, Public Sector

    £20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...

    Sales Executive

    £20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

    Day In a Page

    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
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week