Should you switch your current account?
Tesco Bank has recently announced it is closing nearly quarter of a million current accounts at the end of November
Tesco Bank has recently announced it is closing nearly quarter of a million current accounts at the end of November, meaning customers will need to look for a new provider.
Even if you’re not affected, it’s still worth considering whether your current account still meets your needs, or whether you might be better off switching to a different account. Thanks to the Current Account Switch Service, moving accounts is now usually very straightforward. All you need to do is open an account with the bank you’ve chosen and if they and your current bank are both signed up to the Current Account Switch Service, your direct debits and standing orders will all be moved across on your behalf. According to the service, 182,745 current account switches took place between April and June 2021, 44,769 more than in the previous three months.
Here, we look at some of the best available current accounts, and why if you’re paying for a packaged account you should make sure you’re actually using all the benefits on offer.
Choose the right account
When deciding which current account is right for you, think about how you’ll use it. For example, if you tend to go overdrawn regularly, you’ll need an account which has low overdraft interest charges, and ideally an interest-free buffer, so that you won’t get hit by charges for going a few pounds overdrawn.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Those looking to borrow would be wise to compare overdraft tariffs carefully as many accounts now charge more than 30% EAR, whereas one of the best deals with a lower charge comes from Starling Bank at 15% EAR.”
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If you tend to stay in the black and are looking for a current account that will pay you interest on your cash, Virgin Money’s M Plus account pays an impressive 2.02% annual interest a year on balances up to £1,000, whilst Nationwide’s FlexDirect account pays 2% on balances up to £1,500. You must pay £1,000 a month into the Nationwide account to qualify for the 2% interest and the rate falls to 0.25% after a year.
Some banks offer tempting perks to persuade you to switch to them, and these can be well worth taking advantage of, provided if you’ve checked the account is right for you. For example, you’ll get a £150 gift card to spend on Virgin Experience Days when you switch to the M Plus account using the Current Account Switch Service. It should take no more than seven days to switch your current account and your money, standing orders and direct debits will be transferred across automatically.
Similarly, switch to HSBC’s Advance account tvia MoneySuperMarket.com or MoneySavingExpert.com and you’ll receive a £140 switching bonus. Again you’ll need to switch your account using the Current Account Switch Service. This offer ends on 19 August 2021.
There’s no fee to open the Advance account and current account holders will have access to HSBC’s Regular Saver account which pays 1% annual interest on monthly payments between £25 and £250.
Do you really need a packaged account?
If you’re paying for your current account every month because it comes with a range of perks such as travel insurance, mobile phone and/ or breakdown cover, think carefully about how often you actually use these benefits.
These accounts typically charge around £15 a month or more, so will usually set you back at least £180 a year. If you only use one perk that the account offers, it’s worth checking it’s cheaper to buy it on its own. If it is, then it won’t be worth forking out for your packaged account each month. However, if you tend to use all the benefits on offer, and it would cost you more to buy them individually, your packaged account is likely to be a worthwhile investment.