Current accounts: Move if you are regularly in the red
Tuesday, 08 September 2009 11:56
Bank customers who regularly face unauthorised overdraft charges are being urged to switch.
Yesterday, Royal Bank of Scotland cut its unauthorised overdraft fees - prompting a flood of interest again in current accounts.
Research by moneysupermarket.com earlier this year found over half of Brits were overdrawn at least once in the last 12 months, and 17 per cent were continually overdrawn.
Bank charges - and putting the problems of the test case going to the new Supreme Court aside - are one issue that really get the goat of consumers.
No-one wants to get over their limit, and being hit by an extra charge when it happens - and so increasing financial strains - is a major annoyance.
At the same time, people accept the bank shouldn't be a free source of money, but it is that once I a while outgoings jump.
If you bank is giving you a bad deal, then switch.
With charges varying so much across the market, though, switching is not so easy as comparing accounts can be like comparing apples and onions.
Some banks no interest on unauthorised overdrafts but just a flat fee, while others charge higher interest and fees.
Fees also charge depending on how much you are in the red or the number of times.
The table below shows the confusion there is.
"Our advice is to avoid unauthorised overdrafts whenever possible - for most people this means a simple call to their bank," said Ian Williams, director of communications at moneysupermarket.
"If you do continually go into the red then consider switching to a more competitive current account, such as one from Alliance & Leicester, which has a zero per cent interest rate for 12 months and will only charge 50 pence per day, maximum £5 per month thereafter on authorised borrowing."
And if charges do fall, it is now excuse to be more relaxed with your money.
Louise Bond, personal Finance expert from uSwitch.com, said: "RBS customers can still rack up as much as £260 a month in charges which, although it's 25 times lower than the previous £6,688 limit, it's still a hefty price to pay."
UK Current Accounts and charges
| Provider | Account | In-Credit Rate (AER) | Authorised Overdraft Rate (TYPICAL EAR) | Unauthorised Overdraft Rate (TYPICAL EAR) | Unauthorised Overdraft Rate Charges |
|---|---|---|---|---|---|
| Alliance & Leicester | Premier Direct Current Account | 6.00% | 0% (Introductory Rate for 12 months, 50p per day, max £5 per month thereafter) | 0.00% (£5 per day) | Exceeding overdraft limit fee: £5 per day Payment review fee: £25 each item |
| Abbey | Preferred Overdraft Rate Account | 0.10% | 0% (Introductory Rate for 12 months, 12.9% thereafter) | 28.70% | Instant Overdraft Monthly Fee - £25 Transaction £0-£9.99 will cost £5, £10-£19.99 will cost £15, £20-£29.99 will cost £25, Over £30 will cost £30 |
| Barclays | Barclays Bank Account | 0.00% | 0% - £22 once in Personal Reserve (Introductory Rate for 12 months*, 19.3% thereafter) | 0.00% | £8 per transaction, max of 5 per day |
| Nationwide BS | FlexAccount | 0.00% | 18.90% | 18.90% | Unauthorised Overdraft Charge - £20 Unpaid Item Fee - £30 Paid Item Fee - £21.50 |
| Lloyds TSB | Classic Plus Account | 2.50% | 18.90% | 18.90% | Monthly Fee -£15 per month Daily Fee:- Less than £25 - £6 a day £25 to £100 - £15 a day More than £100 - £20 a day |
| Halifax | Reward Current Account | £5 per month | £1 per day up to £2,500 - £2 per day over £2,500 | 0.00% (£5 per day) | Exceeding overdraft limit fee: £5 per day |
| HSBC | Current Account Advance | 0.00% | 19.90% | 19.90% | 1st overdraft in 6 months = free Subsequent overdrafts = £25 Overdraft Fee - Up to £10 = no charge Up to £25 = £10 per item Above £25 = £25 per item |
| NatWest/RBS | Current Plus Account Interest Paying Current Account | 0.10% | 19.24% | 29.69% | Maintenance Charge - £28 Paid Referral Fee - £30 (max. £90 per month) Guaranteed Card Payment Fee - £35 per transaction Unpaid Item Fee - £38 (max. £114 per day) |
| NatWest - as from 1st October 2009 RBS - as from 1st October 2009 | Current Plus Account Interest Paying Current Account | 0.10% | 19.24% | 19.24% | Maintenance Charge - £20 Paid Referral Fee - £15 (max. £90 per month) Guaranteed Card Payment Fee - £15 per transaction (max £90 per month) Unpaid Item Fee - £5 (max. £50 per month) |
Source: moneysupermarket.com 07/09/09
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