Instead of chasing better rates of interest, most of us switch current accounts because we are dissatisfied with the service from our bank, according to research from consultants at Managing the Service Business (MSB). But even if you've been with a bank for years and are happy with the way it has treated you, there may be products out there that are more suitable for your needs.
The big four high-street banks - Barclays, HSBC, Lloyds TSB and NatWest - have been heavily criticised for paying just 0.1 per cent interest on balances in credit, yet charging high rates for overdrafts. NatWest has the biggest rates - 17.9 and 33.8 per cent respectively for authorised and unauthorised overdrafts - on its Current Plus account.
The banks defend these rates by arguing that current accounts aren't designed for holding large balances. Most people use them for transactions, keeping enough cash in their account to cover monthly outgoings. Any extra should be moved to a savings account.
If you do this and are happy with the service you receive, there may no reason to move. But if you keep a sizeable balance in your current account, or go overdrawn regularly, it could be worth switching.
Citibank and Smile, for example, offer an interest-free overdraft of pounds 500, though watch out if you exceed this sum as Citibank charges 35 per cent on unauthorised overdrafts (14.25 per cent for authorised extensions). Smile's rates are lower at 9.9 per cent for authorised overdrafts and 22 per cent if you exceed the pounds 500 limit without permission.
First Direct offers an automatic overdraft allowance of pounds 500, but you will pay 12.9 per cent interest.
Intelligent Finance (IF), Halifax and Cahoot have the lowest authorised rates for those who are constantly overdrawn. IF charges 9.75 per cent, Halifax 9.3 per cent, and Cahoot between 6.4 and 8 per cent depending on whether or not you pay a monthly fee.
If you're always in credit, the interest on balances is the main consideration. Internet banks offer the best rates: Cahoot pays 6 per cent …