Looking for a better home for your money? We give you the lowdown on the best current accounts for 2010....
Towards the end of last year, I received a 'lovely' letter from Halifax informing me that I would no longer be receiving interest on my current account. Overdraft interest rates were also being abolished, and instead, I would be charged £1 a day for the use of an arranged overdraft of up to £2,500 (£2 a day for an overdraft over this amount), or £5 a day for an unarranged overdraft.
Now, as you can imagine, I wasn't particularly pleased to hear this. And indeed, I wasn't alone. After all, millions of Halifax current account customers have recently been switched over to this new Halifax Current Account - whether they like it or not.
However, I decided that instead of simply accepting this, it was time I did something about it. So I decided to follow one of the lovemoney.com mottos and shop around for a better current account. And that's exactly what I did - and it's also what I am encouraging you to do now!
Get switching
If you've had enough of your current account and feel the time has come to find a better one, you're probably either looking for one that has a decent interest rate (if you stay in the black), or one that doesn't charge you too much for using your overdraft (if you're prone to slipping into the red).
So let's take a look at ten of the best current accounts to suit these requirements.
In the black
The table below shows the top six current accounts on the market in terms of interest rates.
|
Current account and provider |
In credit rate |
Overdraft interest rate |
Minimum funding requirements |
|
6% AER on balances up to £2,500 for 12 months, 1% thereafter. 0.1% on balances above £2,500 |
0% EAR for one year. After this, a daily usage fee of 50p is charged, up to a maximum of £5 a month. |
£500 per month |
|
|
Abbey Preferred In Credit Current Account |
6% AER on balances up to £2,500 for 12 months, 1% thereafter. 0.1% on balances above £2,500 |
0% EAR for first four months, then 19.9% |
£1,000 per month |
|
Santander Zero Current Account |
6% on balances up to £2,500 for 12 months, 1% thereafter. 0.1% on balances above £2,500 |
12.9% EAR |
£1,000 per month |
|
£5 a month |
0% EAR. But you'll be charged £1 a day on arranged overdrafts up to £2,500 (or £2 a day if overdraft is bigger), or £5 a day for unarranged overdrafts |
£1,000 a month |
|
|
Lloyds TSB Classic Plus |
2.5% on balances up to £2,500, 0.1% thereafter |
18.9% EAR |
£1,000 per month |
|
cahoot Current Account |
1.10%* on balances up to £250,000, 0.1% above £250,000 |
11.8% EAR |
£1,000 per month |
*No chequebook. Rate drops to 1% if you need a chequebook.
So if you're looking for a current account with the very best interest rate, it's pretty clear that the Alliance & Leicester Premier Direct Current Account, the Abbey Preferred In Credit Current Account, and the Santander Zero Current Account, are your best options - all offering a fabulously tempting interest rate of 6%. In fact, you'd struggle to find a savings account offering a better rate than that - never mind an instant access one, with a fixed rate of interest!
The Santander Zero Account is also handy if you're a regular traveller, as it comes with a fee-free debit card for spending abroad, no ATM charges worldwide and no foreign exchange fees.
However, as always, there is a drawback to all of these current accounts. And that's the fact that the interest rate will fall significantly after one year - to just 1%. So after that time is up, you might want to think about switching to yet another current account.
Unfortunately, the Santander Zero Current Account has an additional downside, as it will only be available to new and existing mortgage customers with Abbey or Bradford & Bingley from this month. Alliance & Leicester mortgage customers will become eligible when the lender rebrands to Santander later in 2010. So this means that unless you've got a mortgage with Santander, you won't be able to apply for this account.
If you're not eligible, another good option to consider is the Halifax Reward Current Account. This account simply pays £5 a month into your current account, providing you pay in £1,000 or more a month.
The £5 credit is a straightforward after-tax benefit for basic rate taxpayers, as Halifax will pay £1.25 per month (20% of £6.25) on their behalf to HM Revenue & Customs. Non-taxpayers can claim this back, and get an extra £15 a year.
You can read more about the Halifax Reward Current Account in Earn £60 a year from an empty current account.
In the red
If you regularly slip into your overdraft, the following current accounts might be more up your street.
Firstly, both the Alliance & Leicester Premier Direct Current Account and the Abbey Preferred Overdraft Rate Account offer interest-free overdrafts for 12 months. The Alliance & Leicester Premier Direct Current Account offers this interest-free period on overdrafts up to £2,000. After the first year is up, a usage fee of 50p a day will be charged (up to a maximum of £5 a month). You must be able to pay in £500 to be eligible for this account.
The Abbey Preferred Overdraft Rate Account, on the other hand, will match your previous overdraft up to £5,000 (depending on your circumstances). After the first year, it will charge an interest rate of 12.9%. Bear in mind that you must pay in £1,000 a month to be eligible for this account.
Alternatively, if you have a fairly small overdraft and you're hoping to pay it off in the not too distant future, you could consider the Norwich and Peterborough Building Society Gold Current Account. This offers an interest-free overdraft of £500 for the first six months. After that, the rate jumps to 11.74%. Just be warned, you'll need to pay in at least £1,500 a month.
The First Direct Current Account also offers an interest-free overdraft of £250. Make sure you don't go over this amount, otherwise you'll be charged an interest rate of 15.9%.
First Direct is renowned for its fantastic customer service and you'll also earn a £100 bonus if you switch to this account! Again, you will need to fund the account with at least £1,500 a month.
So whichever current account you decide to go for, make sure it's the right one to suit you. And whatever you do, don't put up with a current account you're not happy with!
Get help from lovemoney.com
If you need a bit of help boosting your income, we can help.
First, adopt this goal: Make some extra money
Next, why not have a wander over to Q&A and ask other lovemoney.com members for hints and tips about what worked best for them?
More: Where to find the cheapest overdrafts | The top six reasons to switch your current account