New Year, new resolutions. new current account anyone? Here's how to make your bank work harder for you in 2009.
If you're determined to sort out your finances in 2009, your current account is a great place to start.
If you've had the same once since leaving school, you could be leaking cash left, right and centre. Switch to the right account now and you could grab yourself a big interest-free overdraft, earn juicy rates of interest when in credit, and even pocket £100 of free money!
The important thing is to choose the account that fits your specific needs like a glove.
I'm going to outline the most important factors to think about, and point out some of the top deals on offer at the moment.
Juicy interest rates
If your current account is usually in credit, you should bag an account that pays a decent rate of interest on your positive balance.
There's good news on this front: As my Foolish colleague Neil Faulkner explains in this article, the interest rates offered by certain current accounts are now more impressive than many savings account equivalents!
Here are the current accounts that offer the most impressive rates around:
| Current account | In-credit rate (AER) | Minimum funding requirements |
|---|---|---|
| Alliance & Leicester Premier Direct Current Account | 6.5% on balances up to £2,500 for 12 months, 1% below Bank of England base rate thereafter. Balances over £2,500 earn 0.10% AER (variable). | £500 per month |
| The Abbey Current Account (Credit Option) | 6% on balances up to £2,500 for 12 months, 2% thereafter on any balance in the account. | £1,000 per month |
| Coventry Building Society First Account | 3.6% on balances up to £250,000, 2.85% thereafter (rate includes a first year bonus of 0.85%). | £1,000 per month |
Just remember that the highest rate of interest - offered by the Alliance & Leicester Premier Direct Current Account - only applies to the first £2,500 in your account.
And with all the options mentioned, note the minimum funding requirements: You'll probably need to get your salary (or a substantial part of it) paid into the account every month.
Overdraft issues
If your balance is typically in the red, you need to nab a current account that offers a decent interest-free overdraft facility.
Here are my top picks:
| Current account | Overdraft interest rate (EAR) | Minimum funding requirements |
|---|---|---|
| Alliance & Leicester Premier Direct Current Account | 0% on agreed overdrafts for 12 months. Usage fee of 50p per day (up to £5 per month) thereafter. Maximum overdraft is £2,500 | £500 per month |
| Abbey Current Account (Overdraft Option) | 0% for 12 months on agreed overdrafts, 12.9% thereafter. | £1,000 per month |
| Norwich and Peterborough Building Society Gold Current Account | 0% on agreed overdrafts for six months, 9.74% thereafter. | £500 per month |
As you can see, the Alliance & Leicester Premier Direct Current Account comes up trumps regarding overdrafts too.
Just bear in mind that this deal doesn't apply to customers who are moving from another Alliance & Leicester current account.
Read How To Tackle Your Overdraft Today! - by my Foolish colleague Jane Baker - to find out which are the worst current account offenders when it comes to high overdraft charges.
Instant gratification!
Are you looking for a dollop of nice free money to kick off 2009? The First Direct 1st Account - which gives you £100 just for switching - might be the right choice for you.
To get your £100, you'll have to be a new First Direct customer, and to make at least three monthly payments of £1,000 into the account during the first six months.
Of course, choosing an account simply on the basis of a one-off perk would be most unFoolish. However, this account has plenty more to recommend it.
The bank also offers a £250 interest-free overdraft and free `sweep' service, which automatically transfers extra funds into a connected savings account if required. This means you can be sure your savings are always earning interest.
And First Direct has been recommended by many Fools for its fantastic customer service. If, after six months, you're really not satisfied, it will even give you another £100 to leave!
On the downside, First Direct pays NO interest on positive balances.
And to avoid paying a £10 monthly charge on the account, you'll need to put in a hefty £1,500 a month or take out an additional First Direct product, like a mortgage or savings account.
If you don't have the funds to make this account work for you - but you still want free money - have a look at the new Reward Current Account from Halifax.
In a nutshell, the bank is replacing in-credit interest payments with a flat cash payment of £5 per month for account holders who pay in at least £1,000.
This payment will be made no matter how much - or little - is in the account. So in theory, you could withdraw all the money from your account straight after paying in your £1,000, and still receive your reward payment.
My Foolish colleague Laura Starkey tells you all about it in Earn £60 A Year From An Empty Current Account.
More: The Ugly Side Of Current Accounts | My Top Three Financial Tips
Use The Fool's current account centre to help find the right deal for you.