COMMENT
Bag A Better Bank Account Today!

By Cliff D'Arcy
September 5, 2005

How bad would your bank's service have to be before you finally decided to switch? Being fed up with poor service is one reason that spurs many customers into switching current accounts. However, there are significant financial gains to be made from switching to a Best Buy account, such as high rates of credit interest, cheaper overdrafts and lower charges for slipping into the red.

Around seven out of ten adults with a current account bank with one of the 'Big Four' high-street giants, namely Barclays, HSBC, Lloyds TSB and RBS/NatWest. The vast majority of accounts from these (and most other) banks pay a measly 0.1% annual interest on credit balances. In other words, an average balance of £1,000 will earn you the princely sum of a quid each year, which is hardly generous!

On the other hand, with a Best Buy account, you could increase your interest rate to between 3% and 5% a year, earning you £30 to £50 a year on a £1,000 balance, as the following table shows:

Best Buy banking: credit interest rates
Company	Account	Annual equivalent rate (%)	Monthly funding level & Notes
Alliance & Leicester	Premier Plus Current	5.00	£1,000. 0.10% paid on portion of balance over £2,500.
Lloyds TSB	Classic Plus	4.00	£1,000. 0.10% paid on portion of balance over £5,000.
Cahoot	Current	3.90	£1,000. 4.00% AER without a chequebook.
Smile	Current	3.30	None
Halifax	Current	3.04	£1,000.
Nationwide BS	FlexAccount	3.00	£1,000.

Source: Moneyfacts.

You can apply for all of these accounts, except Lloyds TSB's, via our Banking centre.

Some banks have fiddled with their credit and overdraft interest rates following the 0.25% reduction in the Bank of England's base rate last month, with most of these changes taking effect from 1 September. However, on the whole, overdraft interest rates remain excessive, averaging more than 15% a year for authorised borrowing.

Furthermore, as I explained in Overdrafts From Hell!, UK banks make around £3 billion a year from interest and fines on unauthorised borrowing, which is daylight robbery! Why pay up to eight times the Bank of England's base rate (currently 4.50% a year) for accidentally slipping into the red, when you could benefit from these Best Buy rates?

Best Buy borrowing: overdraft interest rates
Company	Account	Effective Annual Rate % (Authorised)	Effective Annual Rate % (Unauthorised)	Monthly funding level & Notes
Alliance & Leicester	Premier Current	0.00	7.90	£500. 0% for a year on up to £2,500, then 7.9% EAR.
Nationwide BS	FlexAccount	7.75	24.90	-
Yorkshire Bank	Current Account Plus	8.29	31.37	-
Norwich & Peterborough BS	Gold Current	8.80	24.90	£500.
Intelligent Finance	Current	9.80	25.00	Offers offset or pooled facility.
Abbey	The Abbey Account	9.9% APR	28.7% APR	£1,000. 0% for four months on transferred accounts.

Source: Moneyfacts.

You can apply for the first two accounts via our Banking centre.

Thanks to improvements to the Banking Code from March 2003, the banks have become much better at switching customers' accounts. Indeed, they handle one of the biggest chores for you, by transferring your Direct Debits and standing orders from your old to your new account within an agreed timeframe. In addition, some accounts provide introductory interest-free overdrafts, which stop you paying charges if you do encounter any hiccups during the first few months. However, you have to contact organisations which regularly pay sums into your account, such as your pay, State benefits, savings interest, share dividends and so on.

Finally, switching accounts will be far less hassle than putting up with rubbish service, so you've no excuse for not switching. What's more, you'll also be better off, perhaps to the tune of £100 a year or more, which is a win-win situation all round!

More: Check out the ace accounts in our Banking centre | Pay no interest with a 0% credit card!

Cliff owns shares in HBOS, parent company of the Halifax.