How Much Your Bank Costs You

Sticking with your bank for all your needs cost you money, but how much?

I'd like to keep this article to two simple tables which speak for themselves with limited commentary. The tables will show you how much better off you'll be after just one year if you shop around for financial products, rather than sticking with your bank.

My first table shows how much you might earn if you typically have a positive current account balance and have a fair bit of savings:

Interest earned in one year with various products

Bank	Current A/c (Average Balance £1,000)	Easy Access Cash ISA (£3,600)	Easy Access Savings Account (£10,000)	Total Earned (1 Year)
Barclays	£0	£94	£25	£119
Co-operative	£0	£54	£79	£133
HSBC	£0	£99	£105	£204
Lloyds	£25	£40	£150	£215
Nationwide	£0	£36	£87	£123
The Best Buy	£106 (Alliance & Leicester Premier Current Account)	£117 (NatWest e-ISA)	£214 (Citibank Flexible Saver)	£437

Where one of these banks (I'm calling all of them banks for convenience) has two or more similar products I've used the one that is most beneficial for you. I've assumed in these figures that you're a higher-rate taxpayer. You'll earn more if you a basic-rate payer.

It's quite easy to see that you'll make £437 by shopping around for best buys, which would make you £222 better off in the first year than the next best and £318 better off than the worst. Therefore, most savers with moderate savings who take out new products this year should do so with their existing bank for up to a year if they believe their bank's service is worth roughly £300 more than everyone else's only.

However, if you took out similar savings products more than a year ago, you'll be faring even worse. Similarly, in a year's time, most of you can expect the difference between the best buys and what you're getting to widen further.

My second table shows how much you might pay if you typically use your overdraft, have a credit card debt and take out a new personal loan:

Cost over one year with various products

Bank	Current A/c (Average Balance -£750)	Credit Card (£4,000 Transfer Paying Off £200pm)	Personal Loan (5-Year Fixed, £8,000, Showing Total Paid In Year 1)	Total Paid
Barclays	£135	£120	£2,015	£2,270
Co-operative	£120	£190	£1,970	£2,280
HSBC	£30	£120	£2,015	£2,165
Lloyds	£142	£132	£1,970	£2,244
Nationwide	£135	£120	£1,934	£2,189
The Best Buy	£0 (Alliance & Leicester Premier Current Account)	£120 (Virgin Money Credit Card)	£1,925 (Your Personal Loan.co.uk*)	£2,045

*When you apply for a loan with Your Personal Loan.co.uk (part of the Co-operative Group), on the last page before you apply, make sure that you read not just the T&Cs but also the page called `Keeping you informed about our products and services'. It has nasty, hidden boxes in there that you must tick before you click `Apply'. Otherwise you may receive calls and emails from other companies selling secured loans, which aren't necessarily cheap and are unsuitable for most people. Some readers have complained of this. It's one more reason to always read and understand every page and sentence of small print.

The rates in the table above are based on what you're `typically' offered. Of course, many people don't get the typical rates. Note that in the personal loan column it includes the total paid that year, not just the debt interest. I did this to put it into better perspective.

Anyone getting the best buys will be £120 better off than the top bank and £235 better off than the worst on my list. By not shopping around after one year, your situation will deteriorate very rapidly. The credit card rates, for example, will shoot from 0% plus a small fee to between 12.4% APR and 16% APR.

In both tables I made the assumption that the rates will stay the same. They won't of course (apart from the loans). What will happen is that anyone sticking with their bank will lose out more quickly, and those of you sticking with your bank even longer will lose a lot more in the following year.

> Compare current accounts, savings accounts, loans and credit cards.