We share our top tips for finding the best current account however you spend your money.
Most people use their current account on a daily basis with little though to whether it’s working well for them, taking it as a given that they’re earning pittance in interest or paying though the nose in overdraft charges. However, it doesn’t have to be this way
Gone are the days when the only option you had was a bog-standard deposit account. There are now a whole host of current accounts on the market, each offering different features and incentives that could potentially save you hundreds of pounds.
Which is the best current account?
Surprisingly there is no straight forward answer to this question. This is because we all use our current accounts in such different ways that there isn’t a single account that satisfies everyone’s banking needs. For this reason, when looking for a new current account it’s better to ask "which is the best current account for me".
In order to find a current account that is going to save you money you first need to take a look at the way you spend. The easiest way to do this is to look over your last few bank statements and determine whether you spend none, some, or all of the month in credit.
Doing this will only take a few minutes and will give you invaluable insight into your financial lifestyle, making finding the right account for your banking needs easy. It is important to be honest with yourself when you do this as you’ll only be short changing your own wallet if you go for an account you think sounds good rather than one that actually suits your spending.
Finding the best account if you’re always in credit
If you never venture into the red then a high interest current account is likely to be the best option for you. Thanks to intense competition in the marketplace many providers are offering great returns on their current accounts. As you’re likely to have a significant amount of your income sat in your current account for at least part of the month, this is definitely something worth exploiting.
While going for the best rate possible seems to be the obvious solution, it does pay to look at the conditions governing any one account a little more closely before you sign up.
Many high interest current account providers cap the amount to which the high interest rate applies meaning anything over this amount will attract interest at a lower rate. The simple way to get around this is to sweep any funds in excess of the capped limit into a savings account each month (some providers offer this service automatically) so you are able to maximise the return you get on your money.
You’ll also need to be aware that some providers only offer the higher interest rate to individuals who deposit more than a certain amount into their account each month. So, check that your monthly income is clear of any limit set before you apply.
Finally, just as with savings accounts, some providers offer a high rate for a set period and then significantly drop the interest payable after this expires. If a high interest end date is specified do make sure you make a note of this. However, if the provider doesn’t specify an end date for the high interest offer it’s worth checking every few months to ensure that you’re continuing to get the best deal possible.
Finding the best account if you need an overdraft
If you spend a lot of time in your overdraft, finding a current account that makes this flexible form of borrowing as cheap as possible should be your primary aim. You really have two options when it comes to doing this.
Firstly, you should look to accounts that offer interest free overdrafts as technically these allow you to borrow for nothing and so can be a good option. It is however essential that you read the terms and conditions of any 0% overdraft account as some charge you a daily fee for their use and could prove costly in the long run. You should also check how long the 0% offer applies for and consider whether you will be motivated to switch again when this expires.
Alternatively, you could choose a current account that offers a fee-free, low interest overdraft so while you will be paying for your borrowing, at least you will know where you stand every time you go into the red.
Finding the best combination account
If you spend most of the month with a positive balance in your account and only dip into your overdraft as you near pay day it can be tempting to go for a high interest option. However, this may not always be the right choice as the interest or fees you pay for using your overdraft are likely to far outweigh any interest you earn. For this reason, it’s best to go for an account that offers you the cheapest overdraft possible as this will save you more money in the long run.
However, if you only break into your overdraft on the rare occasion it could be a good idea to go for an account that offers a combination of a high interest rate and text message banking. Many providers offer this service and will text you if funds in your account are getting low, giving you the opportunity to top up your balance and avoid any charges.
Added incentives
While making your current account as economical as possible should be your primary goal, you also need to think about how you want to use your account.
Do you want an account that operates solely online or would you prefer a branch based service? Do you need a cheque book or is this an extra you can do without?
By thinking about how you use your money and choosing a provider and account that compliment your spending you’ll be able to get the best of both worlds.
Switching current account – how does it work?
Banks cottoned on to the fact that people associated switching current account with a whole lot of hassle a while ago. So, as an incentive to encourage people to switch they have endeavoured to make the process as simple as possible.
Most banks and building societies have dedicated teams of people to perform the switch on your behalf, moving any direct debits and standing orders you have set up across to your new account for you. All you have to do is notify anyone who is likely to make payments into your account (such as your employer) about your new bank details.
You’ll usually be given a schedule that informs you as to when your new account will be in operation and when your payments will be switched across and it’s always a good idea to check that your direct debits are going out as planned. It’s also worth leaving your old account open for a few months after the switch too just in case.
