Consumers missing out on thousands with current accounts

The majority of Britons have never changed their current account even though switching can leave them thousands of pounds better off.

New data from financial comparison service Moneyfacts.co.uk suggests that consumers are missing out on more than four per cent interest on their balance and being charged more than 12 per cent too much on overdrafts.

And most consumers are sticking with traditional providers, with 27 million people banking with one of the "big four" high street banks - HSBC, Lloyds TSB, Barclays and Nat West/RBS.

Halifax estimates that at least ten million of these could benefit by changing provider.

And being overdrawn is no reason not to switch, as new current account providers will simply move the overdrawn amount into your new account.

Considering Alliance & Leicester is offering a zero per cent interest overdraft for the first year after the account opens - rising to just 7.9 per cent after that - being overdrawn is now more of a reason to switch than not to.

Additionally new banks will now contact your old bank, transfer all existing standing orders and direct debits for you, and arrange for your salary to be paid to them as well.

"Many people are still under the impression that it is very difficult to switch current accounts, and a few years ago it was like extracting teeth. Today, there is an agreement among banks to supply details of direct debits and standing orders within a few days making the whole process much easier," said Stuart Glendinning, director of current accounts at moneysupermarket.com.

But despite the ease of switching, Moneyfacts points out that 51 per cent of consumers have never changed current account provider.

By shopping around consumers can find accounts ideally suited to them. Nationwide provides an account that offers savings to travellers and holidaymakers, by not charging them for overseas use, while Alliance & Leicester competes for the globe-trotting market by offering free worldwide travel insurance.

Moneyfacts points out that there are several current account providers offering attractive interest rates of close to four per cent, while people who frequently go overdrawn can reduce the interest they pay on overdrafts to under ten per cent a year with a string of providers.

Halifax is catering for customers that do not have high balances in their current account by offering to refund one per cent of all the money they spend on their debit card, up to £10,000.

For mortgage holders, an offset account can see mortgages paid off years earlier, and overall payments reduced by tens of thousands of pounds.

For Britain's two million Muslims, Islamic current accounts are available that confirm to Sharia law from HSBC and Lloyds TSB.

And if the longer-term benefits are not enough, a string of providers are also offering money to switch to their bank account, with Lloyds leading the way by offering £50 to open its Classic Plus current account, to go with the four per cent interest the account pays on positive balances.