switching current accounts

I’m currently in the process of switching current accounts away from a very low interest bank account (think 0.1%) into a high interest bank account (think >5%). I certainly should have done this years ago, but better late than never.

I opened the original account when I was a student as it had the highest free overdraft facility at the time. I employed the tactic of withdrawing money up to the overdraft limit and depositing that into a high rate savings account. I then used the account as normal. Of course, I spent the overdraft and it took me until the point at which it was about to expire to pay it back. Since then I’ve been earning practically no money on my current account at all.

So why didn’t I change current accounts sooner?

Inertia. I don’t like to run round like a headless chicken looking for the best deal all the time. (I don’t mind doing it periodically.) I wanted to be sure that the account I switched to was likely to stay as a good deal having been burned with high interest savings accounts previously.

I also liked the customer service from the bank I was with. They have lots of branches and good telephone banking.

Fortunately, I’ve had good experiences with my new bank so far. The transfer has gone smoothly. I’m still paranoid that the payments will come out of the wrong account so I’ve left a healthy balance in each to ensure there aren’t any problems. I’d go as far to say as I’d recommend it, but I don’t want to do it again for a few more years.

i can’t believe people gave banks this much money

The other week I watched the ITV 1 show Tonight with Trevor McDonald. This edition was about the popularity of claiming back bank charges and featured Martin Lewis of www.moneysavingexpert.com (which is a great website, by the way).

As a little background information, it is standard practice in the UK for banks to charge about £30 for a bounced cheque or for exceeding your overdraft limit or other similar activities. This is supposed (under the Banking Code) to reflect the costs to the bank of processing these – they send out standard letters and so on telling you that you have exceeded your limits etc. It is widely believed that these charges are unfair, to the extent that they are unlikely to stand up in court as the actual costs to the bank is less than £5.

If you have paid any of these charges in the last six years, there are a number of websites (here, here and here) that have forms and standard letters you can download to claim this money back. As far as I know, these charges have not yet stood up in court and the Office of Fair Trading is currently investigating the fairness of the charges and is widely expected to rule that they are set too high.

Anyway, what actually struck me during the show was the amount of money that people had paid in bank charges. Some of them were getting back several thousand pounds.

Who has that kind of money, to just throw away in the general direction of their bank?

If it was me, I wouldn’t be jumping up and down with joy that I now had a substantial bonus, I’d be feeling sick that I’d wasted a substantial amount of money because I wasn’t able to manage my cashflow properly.

Don’t get me wrong, its not like I’ve never made a mistake with the balance in my account. I think the charges are ridiculously high. I think if you’ve been subject to them you should attempt to claim them back from the banks and sooner rather than later. But, especially if you are owed a large sum, you might want to examine the reasons that you let this money go in the first place, next time you overspend you might not be this lucky.