MONEY COMMENT
Britain's Best Bank Accounts

By Cliff D'Arcy
November 25, 2003

Last week, we wrote about Britain's worst banking products. This article showed how the high-street banks are ripping off consumers by selling inferior bank accounts, mortgages, credit cards and personal loans.

Over the last week, I've received lots of emails from readers asking for more information on the best products out there. So, for the seven out of ten of us stuck with an aging, unloved current account, here's a guide to finding a better deal:

Rule One: DON'T be afraid to switch!

In March, a revised Banking Code was introduced, which included new rules designed to make it easier to switch current accounts:

• When you decide to switch, your existing bank must provide your new bank with a list of all your direct debits and standing orders within three working days.
• Your new account must be up and running within ten working days of your application being approved.
• If either bank makes mistakes during the switch, you won't be liable for any charges caused by these slip-ups.

With switching starting to take off, the banks' procedures are improving, so there's no excuse for staying put!

Rule Two: Decide what you want before you buy!

Your personal Best Buy will depend on how you use your account:

• If you never go overdrawn, choose an account that pays a high rate of interest on credit balances, without charging any fees for day-to-day banking.
• If you slip overdrawn by a small amount once in a while, look for an account that offer a fee-free (even interest-free) overdraft of, say, £100 or so.
• If you are overdrawn heavily or often, pick an account that charges no or low overdraft arrangement fees, plus low rates of interest on overdrafts.

Rule Three: Do your research!

To track down the top accounts, visit independent financial researcher Moneyfacts, which has several tables of Best Buys to suit everyone. Also, you can apply for six of the leading accounts via our Online Banking Centre, which benefits the Fool.

Here are a few of the leading accounts (these rates are for NEW customers):

Lloyds TSB - Classic Plus account
Credit interest (for new customers applying before 11 January 2004): 4.5% AER if you pay in £2,000+ per month; 3.83% AER if you pay in £1,000+. These rates are guaranteed until 16 January 2005.
Authorised overdraft: 0%, guaranteed until 16/01/05, if you pay in £1,000+ per month.
Number of branches: 2,050.
Notes: The interest rate for the portion of your balance over £5,000 is 0.1% AER, so don't keep more than £5,000 in your account! You must logon to Internet banking six times every three months. Unlimited free cheque and debit card usage.
Apply via the Fool

Cahoot - Current
Credit interest: 3.30% AER (rate for no chequebook, from 3/12/03). Guaranteed never to be more than 0.5% lower than the base rate for more than thirty days.
Authorised overdraft: Interest-free up to £250. Typical APR on £250+ is 8.3%.
Number of branches: None (Cahoot is Abbey's online bank).
Notes: The credit interest rate is slightly lower if you opt to have a chequebook.

Smile - Current
Credit interest: 3%.
Authorised overdraft: £500 fee-free; 9.9% EAR.
Number of branches: None (Smile is the Co-operative Bank's online bank).
Notes: Ethical policy, plus the best service rating from Switch with Which?.

Intelligent Finance - Current
Credit interest: 2.75% AER.
Authorised overdraft: No fees; 8.39% AER.
Number of branches: None (IF is Halifax's online bank).
Notes: You earn a higher rate of interest if you have an IF savings account. Can be used as an offset account.
Apply via the Fool

Halifax/Bank of Scotland - Current
Credit interest: 2.53% if you pay in £1,000+ per month.
Authorised overdraft: Switchers get a £2,500 fee-free and interest-free overdraft for 120 days; normally 8.9% AER.
Number of branches: 1,120.
Notes: No fees for authorised overdrafts.
Apply via the Fool

So, don't delay - wave goodbye to bad bank accounts today!

More: Britain's Worst Banking Products! | Finding Financial Best Buys | Break It Off With Your Bank.

The author owns shares in HBOS, parent company of Halifax and Bank of Scotland.