Finding the Best Current Accounts

When opening your first current account, it's easy to opt for the same account your parents have. Or if you are heading off to university and opening your first current account you may choose the one that offers the best perks: such as a free five-year Young Persons Railcard, which gives you one-third off rail travel. Few people give any more thought to it than that.

But seeing that a current account fulfils such a crucial role in your finances because most of your cash flows through it at some stage, it's worth thinking about what you want from it before signing up.

Some banks pay extremely poor rates of interest on current accounts and charge extortionate rates of interest on overdrafts, yet those offering the worst deals also have the largest number of customers.

The 'big four' - Barclays, HSBC, Lloyds TSB, and NatWest - all pay 0.1 per cent interest on balances (although Lloyds TSB also has an account paying a higher rate of interest as long as you pay in a certain amount each month). Other banks pay more than 30 times this amount of interest.

Overdraft Facilities

As well as providing you with a convenient home for your money, most current accounts offer so called overdraft facilities. This means you can use you account to borrow money from the bank.

There are two types of overdraft - the 'authorised' overdraft where you agree with the bank a set limit on any borrowings and the 'unauthorised' overdraft where you slip into the red without first telling your bank or you exceed your authorised overdraft limit. Charges on both types of overdraft are high but especially so on unauthorised overdrafts - they are best avoided.

The big four also charge around 16-18 per cent on authorised overdrafts (although Barclays has some packaged accounts with 9.9 per cent overdrafts). But you can get an overdraft rate of under 8 per cent if you shop around. Yet despite this, some 70 per cent of all current accounts remain with one of the big four banks.

No bank or building society offers the best deal on every single product. One bank may have a fantastic mortgage range but offer a low interest rate on its current accounts. Product providers specialise in certain areas, offering one or two really attractive deals to pull in the punters. Other customers end up paying for this great deal - usually those stuck with an uncompetitive current account.

Check for an introductory offer. Some banks pay a lump sum or charge 0 per cent on overdrafts for a limited period when you open an account. Find out whether you qualify for preferential rates on other products offered by the bank, such as insurance or personal loans.

When comparing personal finance institutions, discover what other services are on offer, such as the ability to buy or sell shares or free financial advice. If you're keen on being green, determine whether you can get an ethical banking account, which are provided by socially responsible banks that don't invest in companies involved in tobacco, gaming, gambling, or pornography.

Here, on our website, you will find accurate information on credit cards, loans, insurance, current account and mortgage deals for efficient personal finance management.

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