OFT launches new current account review
As the OFT launches a review of the current account market, we look at your options if you fancy a change.
The Office of Fair Trading (OFT) is launching a new review of the current account market.
The OFT’s review will look at how effectively the banks have responded to a previous OFT study in 2008. In particular, the OFT will focus on the following issues:
- Are banks providing better information on account charges?
- Do customers have more control over their accounts?
- Has it become easier to switch banks?
Given the recent problems at NatWest and Barclays, I’m delighted that the big banks are going to be under more pressure to improve their service and make it easier to switch accounts.
That said, switching has already got a lot easier in the last few years, so there’s no need to hold back and wait for the next OFT report before you decide to move your account. If you’re unhappy with the service you’re receiving, I’d urge you to get cracking and switch now!
And I’m pleased to see that the level of switching has already risen significantly in recent weeks. Nationwide says that the number of people switching current accounts to the building society has risen 67% while Norwich & Peterborough has reported that switching has doubled!
So if you’re considering switching your current account, where should you go? Let’s look at your options:
1. Ethical accounts
When we write about current accounts, we normally focus on the accounts with the best deals – the lowest overdraft rates, the biggest rewards and so on.
But that’s not the primary issue for all switchers. Some people want to support banks that have a strongly ethical approach.
Co-operative Bank is perhaps the best-known ethical bank. It refuses to lend to companies involved in a range of activities including arms manufacture, animal testing and genetic engineering.
Of course, you may not regard defence contractors as unethical, but if you do want to go with the Co-op, your best bet is probably to go for the Co-operative Bank Current Account Plus. You won’t have to pay a monthly fee and the account comes with a fee-free £200 overdraft. Co-op also operates the online Smile brand.
Other ethical banks include Charity Bank and Triodos Bank. Many building societies and credit unions would also argue that they’re ethical businesses.
2. Mutuals
The other advantage of building societies and credit unions is that they’re mutual organisations. The Co-op is a mutual too. Mutuals are owned by their customers – or members – rather than shareholders who are looking for the largest possible profit.
I think the mutual model is attractive, and you can also get some decent products from mutual providers.
I’ve already mentioned Co-op’s best current account, but I also like Nationwide’s FlexAccount. You won’t have to pay a monthly fee, and you can get free European travel insurance with the account. That’s as long as you pay £750 a month into your account.
You’ll also get exclusive access to several other Nationwide products including the cracking Nationwide Select Credit Card.
Norwich & Peterborough is another building society with an attractive current account. If you open the Gold Classic current account, you won’t have to pay any fees if you use the account’s debit card abroad.
But you’re obliged to pay at least £500 into your account every month.
3. Not the ‘big five’
Some switchers may not be overly concerned about ethical issues or who owns their current account provider. They may just be fed up with the five biggest banks – Barclays, Natwest/Royal Bank of Scotland, Lloyds/Halifax, HSBC, and Santander.
I have a lot of sympathy with this view. I think we desperately need more competition in the current account market, so I want to support the ‘challengers’ in this field. That includes all the mutuals and ethical banks we’ve looked at already, but I’d also add Metro Bank to the list.
4. The best deals
Of course, some folk will just want to focus on the accounts that will work best for them financially.
If you’re in that camp, I’d highlight four accounts as worth considering:
Santander 123 Current account
The Santander 123 account pays up to 3% interest on the money in your current account, and will also give you cashback on some bills. However, you’ll have to pay a £2 monthly fee and pay in at least £500 a month. It’s also worth noting that Santander has a poor reputation for customer service.
Lloyds Vantage accounts
If you add the ‘Vantage’ option to your Lloyds or Bank of Scotland current account, you could earn up to 3% on your account balance. You don’t have to pay a fee for this, but you do have to ask your bank for the option. You also need to pay in at least £1000 a month and stay in credit.
first direct 1st account
first direct has a great reputation for customer service and you’ll also get a £100 reward when you’ve had the 1st account for three months.
The only drawback is that you’ll have to pay in at least £1,500 every month to get the reward and you’ll hit by bank charges in the future if you fail to pay in that much.
Halifax reward current account
With this account, you won’t receive any interest on your balance, but you will be paid £5 every month you pay in at least £1,000. The nice thing about this account is that you can spend the money the day after you’ve paid it in – you’ll still get the £5 reward.
Plenty of choice
So there you have it, we’ve rounded up all of the most attractive current accounts. The choice is yours!
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