Get a current account that beats the credit crunch

	Rate (AER)	Minimum Balance
A & L	8.50%	£1
Lloyds TSB	4.00%	£1
Barclays	3.00%	£1
Barclays	3.00%	£1
A & L	1.00%	£1
* Based on £2000 Credit and is a limited guide to the market

Despite the fact that there are some attractively priced current accounts on the market and we needlessly throw away £8.3 billion a year on bank charges and low interest rates, only around 6% of us switched current account in the past 12 months, according to the Office of Fair Trading (OFT).

In its recent report Personal current accounts in the UK the OFT hit out at banks saying that the complexity and lack of transparency makes it difficult for us to compare our existing account with other banking offers.

Few of us are even able to recall what interest rate we get on credits and what the overdraft charge is. This could be costing us a fortune. Not knowing what the unauthorised charge is could result in huge bills and by not getting a good interest rate when on credits, means you could be losing out on hundreds of pounds.

In the dark about your bank account?

In short, we are still in the dark about current accounts. The OFT now wants to work with the banks to help them make current accounts easier for us to understand. It said that the market for personal current accounts is not working well because we dont have easy access to the information we need to switch account so few of us do, which means the banks dont bother to provide incentives to get us to move. This has given them the opportunity to make billions out of our apathy for years and years.

Want to stay current with whats happening in banking? Learn more about your accounts competitors.

Charges are opaque

Current accounts are dense because of the pricing structure used by the banks. Unlike other countries we dont pay for banking services in the UK, such as, cheque books, debit cards, direct debits/standing orders and paper statements. Instead, the banks make their money from other charges, such as, for unauthorised overdraft limits. The OFT said that the banks earned 81% of their £8.3 billion revenue from current accounts opaquely, for example, through insufficient fund charges or from earning interest from your balance.

Let there be light

With the OFT expected to bring out a report this month about unfair charges on unauthorised overdrafts and late payments, the pricing structure for current accounts is likely to change. In the not too distant future, the cost of running your bank account should become more transparent. You might choose between a flat fee or a pay-as-you-go option.

In many ways this would be fairer because, as the OFT says, the poor are subsidising the wealthy. Often it is more vulnerable people on low incomes that pay the highest charges. The OFT said that in 2006, more than 1.4 million people paid £500 in charges.

04 June 2008 © Moneyextra.com

back

Moneyextra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.