It is easy to get confused with the advantages and disadvantages of the current accounts available on the market and many people end up losing hundreds of pounds by sticking with an account that doesn’t suit their circumstances.
If you know that the cash in your account is going to be topped up on a regular basis, then you should take advantage of the high interest rates.
The main thing to watch out for here is ‘special offer periods’, for example, some high interest rates are only offered for the first six months when you open an account, and then drop considerably when this time is up.
However, if you have a habit of uncontrollable spending, you might be better off with a cheap overdraft facility.
Some accounts offer an interest free overdraft, but most of these are limited to a certain time period or have a maximum spend, after which you are charged.
The thing to watch out for is the hidden charges, for example, if you go over the agreed credit limit some high street banks will charge you a set amount.
Current account providers made £4.7 billion from unauthorised overdraft charges in the last year, charging between £20 and £30 when a customer dips into the red and a further £25 to £30 for standing orders and direct debits paid while that customer was in the red.
Which? recently slapped an ASBO – Anti-Social Banking Order – on current account providers and launched a website to help consumers challenge these charges and put pressure on the banks to reduce them. Since April, there have been almost 30,000 downloads of information and template letters from the site.
Doug Taylor, Which? campaign team leader, said: “The sheer number of people downloading the template letters from our site shows that the banks can’t ignore this issue for much longer.
“Many thousands of people are fed up with being made to pay unreasonable charges and are preparing to do something about it.”
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