Money Insider: Forget the spin and pick the best account for you

Cut through the marketing spin and choose a current account that's right for you.

Virtually everyone has a bank or building society current account, but despite all the high-profile advertising of headline rates and special deals, do you really know which account is most suitable for you?

As with most things in life it's not as straightforward as one current account fits all. In fact I can think of at least four main areas to consider if you're in the market for a new bank account.

Credit interest

This is the angle that some of the providers use to tempt you to sign up as a new customer. However these days receiving interest on your current account balances has become a bit of a rarity. Both Santander and Alliance and Leicester will pay you 5 per cent, but it's worth noting that the attractive rate is just for the first 12 months, and only on the first £2,500 of your balance. So while you could earn a maximum of £100 (after tax) in year one, the most you could earn in subsequent years when the rate drops to 1 per cent is a far less enticing £20.

On the other hand the reward account from Halifax will give you a net payment of £5 every month as long as you pay in at least £1,000 into your account. This is not a short-term offer, nor does it depend on you keeping a specific balance in your account. A word of warning though, whilst it's a good option for credit balances, if you dip into overdraft from time to time, then the daily overdraft charges will soon wipe out your £5 monthly credit.

Overdraft charges

If you find that your account swings into the red each month, maybe in the week before payday or whilst you're waiting for your expenses to be paid, then you need to focus on the charges for going overdrawn. Again you can get 0 per cent for the first 12 months if you switch to Santander, Alliance & Leicester or Barclays. For a longer-term deal then Cahoot at 11.8 per cent, Santander at 12.9 per cent and The Co-operative bank at 15.9 per cent are the most competitive for authorised borrowing on your current account.

Debit card charges abroad

This is an area that people tend to overlook when comparing accounts, but if you're a regular traveller overseas, then it's something worth thinking about. For example, if you go to Europe three times in one year and make two £100 currency withdrawals and two £100 debit card purchases each trip, it would cost you a total of £53.88 with Lloyds TSB or £52.50 with NatWest, whereas if you had a Nationwide Building Society flex account there would be no charges to pay. So if you're often holidaying abroad, perhaps with your own home in the sun, this could be the basis on which to choose your bank account.

Customer service

Away from the nuts and bolts of how much you can earn or how much you'll be charged, all that some people want from their bank is a reliable and consistently good level of service.

Whilst the big high street banks don't fare well in this area when you look at the surveys from the likes of BBC Watchdog and the media, you'll regularly see the likes of First Direct, Smile and The Co-operative bank at the top of the list for customer satisfaction.

So if you've remained loyal to your bank since you first started work, maybe this has given you some food for thought and perhaps the impetus to move to an account more suited to the way you manage your finances.

Product round-up

Borrowers looking for a new home loan will be disappointed to learn that the excellent five-year fixed rate mortgage from Britannia and Co-operative bank has been pulled following heavy demand. It's not surprising as the sub-4 per cent rate was outstanding in today's market. However at the time of writing it is still possible to get a five-year fix from Chelsea Building Society, also at 3.99 per cent, to 75 per cent loan-to-value and with a very reasonable product fee of £495.

Shorter-term fixed deals are still getting cheaper as competition between lenders remains fierce. Yorkshire Building Society is holding top spot with 2.89 per cent and £995 fee, while The Co-operative bank is not far behind at 2.95 per cent and £999 fee, both available up to 75 per cent loan-to-value.

The credit card market has been more active during the last few months, with more introductory interest free deals reappearing. This week Nationwide Building Society launched a 0 per cent balance transfer deal for 15 months, an excellent opportunity to restructure and reduce your borrowings and just shy of the longest interest-free deal of 16 months from Yorkshire Bank and Clydesdale Bank.

Andrew Hagger is a money analyst at Moneynet.co.uk

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