Best Bank Accounts

There's a widely reported stat which says, we stay with our bank for 17 years, but only stay married for 11. I think this data is not quite reflective of what is happening and may come from an ONS study which reported that the median duration of marriage at divorce was 12.3 years. But that only measures the marriages that end in divorce and ignores the ones that don't. So while I am not convinced by the often quoted data - I do think that it points to a wider truth about how we are wedded to our banks.

People I know, don't seem to change banks very often. It's a bore to do and there is always something better to watch on TV, drink or even go to the dentist, than the less appealing prospect of changing bank accounts.

So the first important thing to say is that switching is easy and there is a service which does it all for you.

The Account Switch Service Guarantee means your new bank will switch your payments and transfer your balance, and your old bank will take care of closing your old account. So you don’t need to worry.

Easy

​​It's simple to switch. All you have to do is:

• ​Pick a new bank account

• Choose a switch date

• Let your new bank do the rest​.

• Free and for everyone

• Your switch is guaranteed – so any interest or charges incurred as a result of your switch will be refunded

Q: Can I change banks even if I have an overdraft?

A: Yes you can switch even if you're overdrawn – but it can be more complex and will depend on the new bank's policies.

Q: If I regularly have an overdraft, should I still change bank and does it affect my choice?

A: An overdraft can mean the bank will charge you around 40% on the outstanding amount. There are cheaper ways to get a loan than running an overdraft. A loan from Santander for instance will only cost 13% at the moment - so running an overdraft is throwing money away. The fact that you are in overdraft shows you can't afford to do that - so its better to have a loan.

Nonetheless, if you do have an overdraft and want to change banks - look for one with low overdraft rates rather than any other bells and whistles.

Starling Bank has relatively good overdraft rates which change depending on the level of debt you are taking on, but their rates start at 15%, so it's an account worth looking at.

First Direct has a zero charge on the first £250 but then charges 39.9% - so that might be an account worth looking at.

Q: What about accounts with bells and whistles?

Packaged accounts can be great, but you usually pay a monthly fee. In return you can get a variety of 'free' add-ons such as travel or mobile phone insurance. But they don't always make sense and it can be cheaper to buy the cover elsewhere, or you might get better cover or indeed you might not need the insurance, in which case you are paying for nothing.

A typical packaged account which looks quite good is Nationwide's FlexPlus account. It offers:

• Phone Insurance

• World family travel insurance

• UK & European breakdown cover

But it costs £156/year.

Q: Do banks offer you money to switch?

Yes and the offers come and go. NatWest was offering £200 to switch - although the deal is now closed. It's a sign that they think once you open an account you won't leave - so it's worth offering you the cash to get you on board. I haven't seen any great switching deals recently - but it's worth keeping your eyes open.

Q: What about long-term rewards?

A: Since most people stay with their bank for ages, it may be better to look for long-term rewards.

Santander's Edge account replaces their very popular 123 account, You get 1% back on certain bills such as utilities and mobile phone and 1% back on most supermarket and travel spending. There is a maximum monthly payback of £10/month. But it costs you £3/month. So you could make a profit of £7/month as well as getting interest on a linked savings account which is currently paying 7% - which is not to be sniffed at.

It' also worth looking at the Halifax Rewards Account which also has charges and some benefit schemes,

Most accounts like this will demand that you deposit a regular minimum sum, so you are committed to using it and are not just opening it to get the benefits.

App Banks

The app banks are all about ease of use. Although the traditional banks are catching up - the app banks tend to be better.

I think it's a real shame that you can't open dummy accounts to see which one works the best for you - since it's all about the user interface, you'd think they would showcase what they can do. But the truth is that you have to open the account to see how it works.

Chief amongst the advantages of apps like Monzo and Starling, is there ability to open virtual piggy banks for each savings target. So you can open a Holiday Pot or an Eating Out Pot - which enables you to budget for each type of expense and I think has become a must-have for many people or at least a should-have.

Since they have no branches - everything is done via the app and even access on a computer isn't great - so you have to be happy with dealing with things on the phone.

What I love about them is you can apply immediately on a phone - very easy

Here are some of their features (although they can change and like phone contracts - can be hard to compare)

Starling

• 3.25% AER on balances up to £5,000

• Enables you to track your spending across 56 different categories

• They send you a phone notification every time you spend, get paid, or pay a bill

• Deposit cheques of up to £1,000 by simply taking a photo of it in the app.

• No fees to use cards abroad

Monzo

• Has 4 types of accounts with free and paid versions

• Analysis spending

• Sends automatic transaction notifications

• Post cheques to pay into your account

• Paid accounts pay 4.60% AER (variable) interest, paid monthly

• No fees to use cards abroad

Revolut

Has 3 types of accounts with free and paid versions

• Fee-free currency exchange for over 25 currencies (up to $1,000 a month)

• 2.29% AER/Gross (variable)* paid daily on your savings,

• Withdraw up to £200 or 5 withdrawals per rolling month (whichever is reached first) with no withdrawal fees charged by them.

Note: Revolut does not have a UK banking licence. Its website says "At the moment, Revolut holds a banking license for the EEA (European Economic Area), which was granted by the Bank of Lithuania."

Revolut says: "In the UK, Revolut is not a bank but an e-money institution, authorised under the UK Electronic Money Regulations. This means, in particular, that FSCS protection does not apply to the e-money or payment services we provide"

The FSCS is a compensation scheme run b y the government which protects your savings if the bank goes bust. You are safeguarded up to £85,000 per eligible person, per bank, building society or credit union up to £170,000 for joint accounts.

At the time of writing Revolut deposits are not protected by the scheme.

(April 2024)

Details change all the time so do check it all out before acting on anything.

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