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Current accounts are
those used for day-to-day living expenses. Account holders can add
or withdraw money at any time and make payments via cheque or debit
left in current accounts does not accrue much interest. Thus it's
best if savers don't leave large sums of cash in those current
accounts. New current accounts have come onto the market with
interest rates to rival those of savings accounts. Such accounts
only offer interest on a certain amount of money – say up to £2,500
– so take care to check the details.
Packaged Current Accounts
For a monthly fee,
many banks offer packaged current accounts. These accounts typically
offer better rates, authorised overdraft rates, and benefits
packages, for a fee of around £25 per month. The benefits package
can include things like international travel insurance, mobile phone
insurance, preferential rates, and many other products offered by
Such packaged accounts are looking more appealing due to the bank
charges battle, but many of them offer the lowest interest rates on
the market and some charge incredibly high rates for authorised
overdrafts. Additionally, by saving on the monthly fee and
increasing the rate of return for deposits, account holders would
actually be better off putting money in non-packaged accounts and
buying those benefits separately.
Bank Charges Battle
Seven banks and one
building society have been embroiled in a two-year legal battle with
the Office of Fair Trading (OFT) concerning overdraft charges. The
banks lost their appeal to the High Court in May 2009 and the
dispute has now moved to the House of Lords, the highest legal
authority in the UK.
The controversy surrounds overdraft charges, fees that can cost
customers up to £35 for each instance. The OFT contends it should be
able to assess the fairness of such charges and should it prevail,
it's expected to release a report critical of the practice.
Banks make around £2.5 billion per annum on such overdraft charges.
There are currently at least 1.1 million bank charge reclaims that
have been put on hold while the battle continues. If the Office of
Fair Trading prevails, the banks would have to pay billions in bank
The legal battle has made switching current accounts much more
common. When choosing a new current account, make sure to check for
high fees, overdraft charges, and minimum monthly contributions.
Still, with the many options in the marketplace, customers may get
better interest rates, better service, and more flexibility if they
simply conquer inertia and do their research.