The real cost of current accountsWhich? reveals the risks of picking the wrong bank

20 July 2014

Upset woman looking at her bills

A Which? investigation has revealed how much consumers could be left out of pocket by choosing the wrong current account.

Our research highlights the huge differences in interest paid and overdraft fees charged to customers of different banks.

It shows that some customers could be hundreds of pounds better off within months if they switched banks.

However, new data from the Payments Council suggests that only 1.2% of current account customers have switched banks in the past year, meaning millions of people could be losing out. 

Go further: Best bank accounts - more than 50 current accounts rated

Huge differences in overdraft charges

To find out the real costs of banking, we looked at three months of current account statements from three consumers - someone who regularly uses an authorised overdraft, someone who occasionally dips into an unauthorised overdraft, and another who always stays in credit.

Our customer who always stayed in credit had at most £1,949 in their account, and on average £687. They could have £16 in interest and cashback from the Santander 123 Account over the three months. Yet, in 13 of the 18 accounts we tested, they would have earned nothing at all. 

The regular authorised overdraft user, who spent 40 days overdrawn, 38 within a pre-arranged limit and two days over it, would have faced fees ranging from around £60 with the Santander Everyday account to just six pence with First Direct’s 1st Account.

Our unauthorised overdraft user, who spent 17 days overdrawn by at most £52, and on average £31, would have paid around £150 in charges with the Co-operative’s Standard Current Account. In contrast, they would have had no charges with First Direct’s 1st Account or a charge of just 25p with the Co-operative's Current Account Plus or Smile's Current Account.

Go further: Finding the best current account - read our step-by-step guide

Which? welcomes midata scheme

Which? welcomes the Government’s midata scheme, due to start in April 2015, which will enable current account customers to download data on their last 12 month’s transactions. They will be able to feed this into a comparison site to check how much their account is costing them and whether another would suit them better.

Six of the biggest high street banking groups have signed up to the scheme so far, but the whole banking industry needs to take part for customers to be sure they’re getting the best account for their needs. We want every current account provider to commit to midata without delay.

Richard Lloyd, Which? executive director said: 'It's almost impossible for even the most savvy consumers to work out if they have the best current account. Many could save money by moving to a different bank, including people who stay in credit, but when it's so difficult to figure out the cost it's no wonder the levels of switching are still so low.

'All banks should commit to the Government scheme making it easier for customers to work out the fees and charges so they can judge if they have the right account.'

Go further: How to switch bank accounts - all you need to know about the switching process

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