Go on, ask yourself that question...
With money being a bit tight for most of us these days, it's important to make sure your current account is doing its best to look after your hard earned cash!
So, if you are thinking of switching your current account to another bank, would an interest rate of more than 8% be enough to tempt you?
We think it might....
This week, Alliance & Leicester upped the battle for current account customers by increasing the in-credit interest rates on two of its deals to an impressive 8.19% gross (8.5% AER).
That's over than 80 times higher than the 0.1% interest paid by many of the standard current accounts offered by the "big four" players (Barclays, HSBC, Lloyds TSB and NatWest/Royal Bank of Scotland).
Miserly is the word you are looking for...
A&L's table-topping deal is only available to people who switch their current account to A&L, and is the latest of many of headline-grabbing offers from other banks keen to topple the dominance of the big four banks, especially as around 80% of us haven't changed our account in the past 5 years.
Are you getting a bad deal from the big four?
If you are one of the millions of sheep, sorry people, who have a standard current account with the lavishly rewarded in-credit interest rate of just 0.1%, you should do the math.
If you have got £1,000 in your account, that means you are earning a crappy £1 interest a year, says the moneyfacts.co.uk website.
"If you have a healthy balance in your account, you could make more than £180 in interest by switching accounts," it adds.
At the other end of the scale, if you rely on an overdraft, moving your account could mean you save yourself a small fortune in interest and charges.
Here's an example: a Lloyds TSB customer who uses their standard Classic current account and has a £1,000 authorised overdraft would pay £193 a year in interest, based on the account's overdraft rate of 19.3% EAR. But if he or she switched to Norwich & Peterborough's Gold current account, where the overdraft rate is 0% for the first six months, then 7.74% EAR, they would pay £38.70 in the first year.
That's a saving of £154.30!
Best-buy accounts?
So, if you fancy making your money more efficient, what kind of deals are on offer if you plan to switch?
Its 8.19% rate applies to both its
Premier Direct account and its recently launched Premier 50 account, which is only available to people over the age of 50 and costs £10 a month. In both cases, this rate is paid on balances of up to £2,500. Above that amount, what you earn on your money falls to just 0.1%. And their stonking rate only applies for 12 months; after that, it reverts to Bank of England base rate minus 1%, which is currently 4.25%.
Furthermore, people taking up the Premier Direct offer need to pay at least £500 a month into the account. The bank says customers will also benefit from the interest-free overdraft structure A&L introduced last year; there are no interest or usage fees on agreed overdrafts for the first 12 months.
Their account is paying 7.72%. As with the A&L deal, that is for balances up to £2,500 and lasts for 12 months only; after that, you receive the standard interest rate, which is currently 2.47%. And you need to credit the account with at least £1,000 a month.
Their High Interest Current Account is paying 6%, and, again, this is for balances of up to £2,500, with the rate falling to 0.1% above this amount. You need to pay in at least £1,000 a month. But, unlike some of the other deals, this is not a 12-month-only offer.
- Coventry Building Society
Their current account, called Coventry First, pays 5.94%, though this rate includes an 0.85% interest bonus lasting for 12 months only. You need to pay in at least £1,000 a month, but the big benefit of this account is that decent rate applies to all your money, not just the first couple of thousand or so.
Their Gold account is offering 4.5%, provided you pay in at least £1,500 a month and opt out of receiving paper statements. (It saves trees, lemurs and the planet)
Their Classic Plus account pays 4.17% on balances of up to £2,500, with the rate falling to 0.1% above this amount. You need to pay in at least £1,000 a month.
The small print!
As you have no doubt seen, there are a number of strings attached to these great rates.
In the case of both A&L's Premier Direct and Lloyds TSB's Classic Plus accounts, in addition to the requirements outlined above, you need to "use internet banking regularly". Meanwhile, to benefit from Abbey's 7.72% in-credit rate, you must use Abbey's switching service to open the account. In some cases you also have to be aged 21 or over to sign up.
Who should I choose?
Hmm, a good question to ask!
The answer is dependent on what you are looking for: if you are looking for a great in-credit interest rate, the A&L deal is clearly top of the table, but that rate is only fixed for a year, and then falls sharply. The Halifax and N&P deals offer lower rates, but they are not limited to 12 months, so you may end up enjoying a decent rate for longer.
However, if a low overdraft rate is important to you, A&L's Premier Direct again scores highly, as there are no interest or usage fees on agreed overdrafts for the first 12 months. After 12 months, the 0% overdraft rate continues, but a usage fee of 50p a day (£5 maximum per month) applies if the agreed overdraft is used. N&P's Gold account also boasts a decent deal on overdrafts.
Most financial institutions are so keen to sign you up, that they throw in quite decent freebies. Internet and phone bank
First Direct offers £100 if you choose its current account, and another £100 if you are not happy and want to leave.
But First Direct recently stopped paying interest on current accounts, and some customers have to pay a £10 monthly fee. Meanwhile, A&L says that any switcher who is introduced to its Premier Direct or Premier 50 current account via a recommendation from a friend, will receive £25 for themselves, and £25 for their acquaintance.
Some current account holders have been reluctant to
switch to another bank or building society because they are worried the whole process will be a nightmare and lets face it, sometimes it really is!
But banks insist that people have nothing to be concerned about. The industry's code of good practice states that if you decide to move your current account to another financial institution, details of your standing orders and direct debits will be passed on to the prospective bank within three working days of the request being received.
The prospective bank will tell you how long the switch is likely to take, and will give you what you need to operate the account within 10 working days of approving your application. The code also states that banks will cancel any charges that people have to pay as a result of any mistake or unnecessary delay that occurs during the transfer.
Many institutions like Halifax, have introduced dedicated switching teams who will handle all the legwork for you: Some even offer payouts if the account is not switched within the specified time.
Norwich & Peterborough Building Society says that if it takes any longer than 10 working days to transfer over all your direct debits and standing orders, it will give you £50 for your trouble.
Meanwhile, Abbey is one of the institutions that provides an interest-free overdraft for the first four months, so that you are protected in the event of any problems.
Other current accounts worth looking at are the Citibank Plus Account and the HSBC Bank Account Plus.
So, it you think that you have had your current account too long and fancy a change, then you can switch here.
(All rates quoted are correct at time of publication)
Current account chaos linked to penalty charges