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Associate Article

Switching your current account

Generally speaking it’s a good idea to reassess your current account every once in a while. After all despite the growing ‘rate tart’ culture in the credit card market which has seen increased numbers of us shifting our credit card debts to a card with a better introductory rate this mentality has been slow to carry over into the current account market. Indeed, for some reason we Brits are strangely disinclined to switch current accounts despite the likelihood that we could get a much improved deal elsewhere.

This reluctance is particularly surprising given the fact that plenty of banks are offering rather attractive rates in a bid to pull in new custom. There are several good reasons why you might be better off switching to a new current account; firstly it’s likely, especially if you’ve stuck with the same account for years, that your current deal leaves something to be desired in terms of value for money. Take a look at your AER, chances are you could be earning an awful lot more interest. In fact, the majority of current accounts offer a meagre 0.1% a year. If this is the case then it really is time you reassessed the situation.

There are a couple of points to consider before you run off to find a new, better value account: Firstly be aware of tempting introductory rates that will get slashed to a considerably less competitive rate after a year. This is something we’re probably all familiar with from a host of other financial products and in the case of a 0 per cent credit card for instance, shouldn’t be viewed as a reason not to switch; after all you can simply switch again before the introductory rate expires. Given that we are generally less likely to switch current accounts with the same frequency as credit cards however, you’d be well advised to consider the long term value of a new account. So make sure that before you take the plunge you look beyond the initial rate on a prospective current account and check out the follow-on rate; here are a few examples:

Bank Account Initial Rate (AER) Follow-on rate (AER)
Alliance & Leicester Current account (Premier Direct) 6.50 percent (lasts until 31/01/09) 1 per cent below base rate
Abbey Current (Credit Option) 8.0 per cent (lasts for 1 year) 2.50 per cent
Lloyds TSB Classic Plus 6.40 per cent (lasts for 1 year) 4.25 per cent


Figures taken from Motley Fool Current Accounts, correct at time of writing (10/12/2007)

Also, keep in mind that the majority of high interest accounts will only pay the maximum, advertised interest rate up to a certain balance; the Lloyds and A&L Current Accounts for instance both pay the full 6.50 per cent interest on balances up to £2,500 but for anything more than that reduce the rate to a paltry 0.10 per cent.

Still, all things considered most of us are likely to benefit from switching current accounts given that even after the introductory period has ended such high interest accounts comfortably beat the average high street account on interest. To help you see how your account compares we’ve compiled a table of some of the most popular current accounts:

Bank Account Credit Rate (AER)
Natwest Current Account 0.10 per cent
Barclays Standard Bank Account 0.10 per cent
RBS Current Account 0.10 per cent


Figures taken from Motley Fool Current Accounts, correct at time of writing (10/12/2007)





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