If your bank is paying desultory rates of interest when you're in credit, or charging extortionate overdraft rates, don't just talk the talk. Walk the walk.
For the last three years I've been getting a fairly reasonable rate of interest on the money I have passing through my current account. You'd be surprised how most current accounts generate a miserly 0.1% on accounts in credit and charge exorbitant rates for overdrafts, whether authorised or not.
Thankfully, now that it is so much easier to switch accounts, competition for customers has encouraged banks to offer better deals. According to the Banking Code, banks are now required to take action within three days of receiving instructions to move your account to another bank.
So, if you're generally healthily in credit throughout the month, which current accounts now offer the best interest rates? According to Moneyfacts, the top five are:
| Company | Account | Gross Rate/AER | Conditions |
|---|---|---|---|
| Alliance & Leicester | Premier Direct Current | 5.94%/ 6.1% | Rate fixed until 30/04/08. Funding of £500 per month required. 0.10% paid on balance over £2.5K. Internet banking compulsory. |
| Coventry BS | First | 5.46%/ 5.6% | Funding of £1K per month required. |
| Halifax | High Interest Current Account | 5%/ 5.12% | Funding of £1K per month required. 0.10% paid on portion of balance over £2.5K. |
| Nationwide BS | FlexAccount | 4.25%/4.25% | Funding of £1K per month required. 0.25% paid on balances over £3K. |
| Lloyds TSB | Classic Plus | 3.93%/4% | Funding of £1K per month required. 0.10% paid on portion of balance over £5K. |
If you're more used to being in the red, then your overdraft rate will be rather more important, particularly if you have a tendency to slip into unauthorised overdraft. According to Moneyfacts, the top five cheapest overdraft rates for current accounts are:
| Company | Account | Authorised EAR | Unauthorised EAR | Conditions |
|---|---|---|---|---|
| Alliance & Leicester | Premier Direct Current | 0.0% (for first 12 months) | 5.9% | Funding of £500 per month required. Internet banking compulsory. |
| Nationwide BS | FlexAccount | 7.75% | 24.9% | N/A |
| Halifax | Moneyback | 7.9% | 28.8% | Funding of £1K pm required. |
| Yorkshire Bank | Current Account Plus | 8.83% | 31.37% | Offset/pooled facility available. |
| Intelligent Finance | Current Account | 10.05% | 25.25% | Offset/pooled facility available. |
Beware of current accounts that charge a monthly premium for so-called 'perks.' Things like free travel insurance, car breakdown cover, mobile phone insurance may sound like they're worth the monthly charge, but the terms and conditions of these perks can be quite tough so read the small print thoroughly.
> Compare Current Accounts | What's Stopping You From Switching Banks?