How much does your free bank account actually cost you?
Customers are losing thousands of pounds each year in fees and charges just for being with the wrong bank, according to new research from Which!!! What's worse is that no-one can figure out how to compare account to get a better deal.
Which!!! compared overdraft charges, interest and the cost of using your card overseas between 21 current account providers. They found that by simply having the wrong type of account, you could be paying more than £2,000 in charges.
They say: "In our worst case scenario, going overdrawn without permission and having payments rejected could cost an extra £183 in fees and charges a month with the most expensive account, Bank of Ireland Clear Account Level 1, compared to the least expensive, the Halifax Reward Current Account. If you did this every month, it would add up to a massive £2,197 over a year."
"Even if you only use an authorised overdraft for just a few days a month, you could be around £120 worse off a year if you bank using TSB’s, Lloyds’ or Bank of Scotland’s Classic Account, rather than Clydesdale Bank or Yorkshire Bank’s Current Account Direct. Our latest consumer insight research shows up to five million households are using their authorised overdraft facility."
What is confusing customers is that banks are making information readily available which doesn't help if we're trying to compare accounts so we can find one best suited. At present, the charges are so mystifying and complex, that no-one ever really knows what they're being charged for.
Richard Lloyd, executive director at Which!!!, said: “Our research lays bare the huge difference in fees and charges between current accounts. With many households relying on their overdrafts to cope with the rising cost of living, we’re calling on the Chancellor to force banks to release information so consumers can make sense of the way they use their account and choose the one that is best for them."
"Unless banks make it simple for people to compare the cost of running a current account, the new switching guarantee alone will fail to transform switching rates or significantly increase competition in banking."