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The five best current accounts By Rebecca Brennan
For Britain's banks it's been the year that customers hit back. The argument is that high charges, like those levied on items such as bounced cheques when customers go into an unauthorised overdraft, are contrary to consumer Claims can be made for charges paid over the past six years, and in most cases banks have paid up. The backlash has seen banking complaints to the Financial Ombudsman Service increase by 47% in the last year, while in April, the Office of Fair Trading (OFT) announced a study into personal bank account pricing, alongside a formal investigation into unauthorised overdraft charges. This follows last year's ruling from the OFT that credit card providers should not charge more than £12 for late and defaulted payments. Banking experts warn that any clampdown by the OFT on unauthorised overdraft charges might result in those charges being recouped elsewhere, with fees being levied for currently free accounts or services. If you're still with a provider offering a measly 0.1% AER interest, for example, take a look at our top five accounts for interest (opposite), where providers such as Alliance & Leicester offer 6.5% AER on balances up to £2,500, for a better return on your money. Research from Abbey has revealed that 60% of us have held our current account for 10 years or more, with 65% believing that moving account is too much hassle. To smooth the way, some providers, such as Nationwide, guarantee to refund any bank charges if they make a mistake, while HSBC will give you £10 if your chequebook and debit card are not with you in five working days. If lack of time is a factor preventing you looking for a new account, use a comparison site such as Interactive Investor to quickly identify the range of accounts available. The best offers The better offers tend to be dependent upon a salary or pension of over £1,000 a month being paid into the account, as with Halifax and Nationwide, which both pay a reduced interest rate if credit drops below this amount. If you meet the criteria for an account, make sure that you check the small print. Offers with the highest interest often have a fixed timescale or a maximum amount on which they will pay the interest. Alliance & Leicester's Premier Regular Saver Account, for example, pays 12% AER, but only for 12 months and stipulates a maximum investment of £250 a month. Similarly, Abbey's Preferred in-credit Current Account offers 6.4% AER credit interest, but only on balances up to £1,000, with interest dropping to 2.5% AER on balances over £1,000. But it's no use having an account with a great rate of credit interest if there's always a lot more of the month left than there is money. If you're regularly overdrawn - and particularly if you pay the 18-19% EAR interest charged on overdrafts by some banks and building societies. Many banks will offer some authorised overdraft interest - and fee-free overdrafts. For example, Smile charges no interest on the first £260 of your overdraft and offers a 12-month £500 fee-free overdraft at an interest rate of 11.9% EAR, while Alliance & Leicester has a 0% EAR overdraft of up to £2,500 for 12 months after you open your account. Check too if your provider charges any monthly fees for authorised overdrafts. First Direct, for instance, arranges your first overdraft in six months for free, but charges £25 for subsequent overdrafts, while Northern Rock charges a monthly fee of £15 for overdrafts over £250. HSBC, however, states in its Fair Fees Policy pledge that customers will not have to pay more in fees than they are overdrawn by in a month. Overdrafts Despite the current claims against the banks, none are rushing to reduce their unauthorised overdraft penalties, which are often £30 to £40 for each unpaid or paid transaction. Interest rates can be high on unauthorised overdrafts with some providers, including Clydesdale Bank and the Co-operative Bank, which charge over 29% EAR. The Clydesdale Bank also charges £25 per month, plus £25 a day for each day your unauthorised balance increases, so you could easily end up paying £125 in charges on less than a week's unauthorised overdraft. Also check whether the interest rate applies just to the amount you are over your limit, or to the full overdraft amount. For example, Nationwide has a 7.75% EAR authorised overdraft limit, but if you go over your limit its 24.9% EAR unauthorised overdraft rate will be charged on the whole amount you are overdrawn. You might also consider a packaged account, offering extras such as travel insurance, breakdown cover and card protection for a monthly fee. It's important, however, to look at exactly what's on offer and to read the terms and conditions of the 'extras' very carefully. The 'free' travel insurance, for example, may not apply if you are over 69 or suffer from certain medical conditions. Worryingly, research suggests that 1.3 million customers believe their current account has been automatically upgraded to a packaged account without their consent. While the offers may seem tempting, consider whether you would use enough of them to make it worth paying the monthly charge. A quarter of people with packaged accounts questioned by uSwitch don't use the free 'perks' on offer, yet continue to pay the monthly charge (usually around £10) for them. Customer services Once you have identified the most suitable account for your personal needs, decide how you want to communicate with your bank. If you prefer personal contact, look for a provider with a wide branch network. If you prefer to use telephone or internet banking after you finish work make sure it is available when you are. If most of your banking is done online you may also want to look at the means your bank uses to keep you safe. Many offer online safety and security tips, with Barclays even providing free anti-virus software for online banking customers. If you like to use telephone banking, one issue that may be important to you is the location of the call centre taking your call. An industry survey found that 82% of consumers didn't want to speak to offshore call centres, citing security fears and the increased potential for misunderstandings as their main concerns. In response, some providers, including Lloyds TSB, have moved away from offshore call centres, returning their operations to the UK. Once you've chosen your preferred method of communication with your bank, you may want to consider what kind of service you'll be receiving from it. If you have internet access, typing the name of your bank and a keyword such as 'complaint' or 'unhappy' into a search engine will identify what other people have to say about a provider, but bear in mind that these complaints are only from a subjective viewpoint.
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