Recently there has been talk of banks introducing pricing structures to current accounts, in light of this moneysupermarket.com current account expert Kevin Mountford previews the best current accounts on the market.
Video Transcript
Well, it was suggested that in the UK we might actually see a pricing structure come in to place whereby you, the consumer, pay for the amount of transactions you undertake on the back of your current account.
The research that we (www.moneysupermarket.com) undertook across the UK showed that you, the UK population, gave this a massive thumbs down and clearly would prefer to see a continuation of the current structure.
So, why have we got to this situation? Well, in simplistic terms, if you take the consumer behaviour around a current account you've got pretty much three types. First of all, the consumer that keeps their current account in credit and earns interest accordingly. You've got a percentage that do go overdrawn, but actually do it on an authorised basis and then the third group are those that go overdrawn but on an unauthorised basis. Effectively the last two groups, in particular the third group, pay significant amount of fees and it is those fees that the banks collect and use to subsidise the free banking.
So, over the last few months clearly you will have seen a lot of focus on the fact that consumers out there that have gone overdrawn and incurred fees that they deem to be inappropriate are claiming money back from the banks and the industry is reputed to have paid £1 billion back to consumers.
What you should still be looking at though is still “have you got the right product to suit your needs?” and there's lots of competition out there and the banks are really keen to get your custom. You've got the likes of Abbey paying 8.0 per cent on credit balances up to £2,500, albeit that the Abbey account is for those that are looking to switch account only. For those of you that have got bigger 'in-credit' balances, the likes of Lloyds TSB is paying 4.25 per cent n balances up to £5,000.
But, in my opinion, still the best all-round product on the market is Alliance & Leicester - they're actually paying 6.5 per cent up to £2,500 balances but on top of that they're giving 0.0 per cent overdraft for 12 months; and even after the 12 months it's very a competitive rate.
So, take time out, don't be afraid of switching accounts and let's see what happens over the coming months.
Thank you.
