We're getting closer and closer to the new Halifax overdraft rules, which take effect from December 6.
Halifax is abandoning the traditional charging structure employed for overdrafts of charging an annual rate of interest and penalty fees if you go overdrawn without permission, in favour of a daily fee. Its current account customers will pay £1 a day for using an authorised overdraft of up to £2,500; £2 a day for an agreed overdraft of more than that amount; and £5 a day if they go overdrawn without permission or exceed your authorised limit.
These changes will make it a lot more expensive for many of Halifax's existing current account customers who are regularly in the red.
On top of that, within the last week the Supreme Court ruled that the Office of Fair Trading can't investigate the fairness of bank charges for unauthorised overdraft use, sparking real outrage among consumer groups and a furious debate in our forum.
Read our article 'What now for bank charges?' for a detailed look at what that court ruling means to you.
Kevin Mountford, moneysupermarket.com's head of banking, urged people to move if they're unhappy with their current account provider.
"Customers need to vote with their feet. We mustn't forget that we have a very competitive current account market here in the UK - much more so than in many other countries - and there is choice out there."
A number of banks are also keen to get us into the switching habit. Alliance & Leicester (A&L) and HSBC are offering cashback to customers who transfer their current account over from another provider. You'll earn £100 if you open an A&L Premier account, while HSBC will pay you £50 if you open its Bank, Plus or Premier account.
The best accounts for overdrafts
So, where can you find the best overdraft rate?
A&L offers one of the most competitive overdrafts on the market. It moved away from the traditional structure of charging an annual rate of interest to customers who are overdrawn in favour of a daily charging structure, similar to that Halifax is introducing later this week.
However, A&L's is cheaper. You pay 50p per day for being overdrawn and this is capped at £5 per month (assuming the borrowing is authorised. If it isn't you'll pay £5 per day). What's more A&L offers an interest-free overdraft for the first 12 months, up to a maximum pre-agreed borrowing limit of £2,000.
This overdraft facility is available across A&L's range of current accounts, although if you're looking to switch now, then its Premier Account is a really attractive offering as new customers will receive £100 cashback for switching to the account online - you must also transfer your direct debits over to the account. This offer has been re-introduced, but it's only available for two weeks so you need to act quickly to take advantage.
In addition to the competitive overdraft facility, the Premier account pays 0.5% on balances up to £2,500 and it includes free European travel insurance. A minimum of £500 a month must be paid into the account. For more details of the account, read our product review.
Another competitive account if you're regularly overdrawn is Abbey's Preferred Overdraft Rate Account. Authorised overdrafts are free for the first year, after which you are charged an annual rate of interest of 12.9%, which is lower than many other banks charge.
The key thing to remember with overdrafts is to make sure you don't go into the red or exceed your agreed overdraft limit without permission. If you do, it will be a lot more expensive.
The best of the rest
Of course, not everyone cares about an account's overdraft facility, so what are the other benefits you could enjoy with your current account?
If you are generally in credit and would like to earn a decent return on your money then the Abbey Preferred In-Credit Account is a winner, paying 6.00% AER on balances up to £2,500. This is fixed for 12 months after which it drops to 1.00%. The rate on balances above £2,500 is 0.1%. Also, you must pay at least £1,000 a month into the account.
A&L's Premier Direct Account also pays 6.00% for the first year. As with the Abbey account, this only applies to balances up to £2,500 - the rate is 0.1% on anything above. After the first 12 months, the rate drops to 0.1%, regardless of the balance. This is an online account and you must pay in at least £500 a month. It's worth remembering that even if you usually run your account in credit, you can benefit from A&L's interest-free overdraft for the first year in case you do slip into the red.
While Halifax is not the most competitive for those who are overdrawn, its Reward account is a great deal if you don't use an overdraft. Rather than paying an annual rate of interest, customers have £5 credited to their account each month, assuming they pay in £1,000 or more.
If you're looking for a new current account, it may also be worth considering packaged accounts. These are accounts that charge a monthly fee, but you receive additional benefits to those available on standard current accounts. Such a fee could be worth paying if you'll make use of the benefits on offer.
For example, the Halifax Ultimate Reward Account costs £12.50 a month, but it pays an in-credit interest rate of 2.50% on balances up to £2,500.
There's a huge package of perks, including worldwide family travel insurance, RAC breakdown cover, mobile phone insurance and a range of discounts on other Halifax products. If that's worth £12.50 a month to you then this is a market-leading packaged account.
It also offers a £300 interest-free overdraft, so if you do dip slightly into the red you're okay.
Alternatively, HSBC's Plus Account is currently offering £50 cashback if you switch to it, plus a range of benefits including worldwide travel insurance, breakdown cover and life insurance. The monthly fee is £12.95, but this is reduced to £6.47 for the first three months. There's no interest paid on credit in this account.
It does have a minimum contract of one year, though, so you're locked in once you switch.
The 'hassle barrier'
Lots of people think switching current account is a hassle and that it could go wrong and cause havoc with their direct debits but it just isn't true.
This 'hassle barrier' prevents loads of us from moving accounts and finding a better deal - in fact we're actually more likely to get divorced than we are to change accounts.
Yet providers have done everything they can to simplify the switching process. Your new bank will have a form for you to complete that authorises it to request details of your standing orders and direct debits from your former bank.
It will usually then ask you to state which of those you want to carry over and tell you when that will be completed by. There's really very little for you to do except close your old account once you're confident all your payments have been transferred.
Watch our video 'How to switch current account' to see how easy it is to move.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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