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To get the best from your bank, here are some questions you should ask:
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- Does my bank offer a suitable overdraft for my needs? You are likely to go overdrawn from time to time. If so, you need a bank which does not charge up to £8 a month for an agreed overdraft, no matter how small. You need an account where the interest charged on an overdraft is kept low. You may need a "buffer zone", where you are not charged at all if you go overdrawn by just a few pounds.
- Are overdraft fees levied monthly or quarterly? If you are charged on a quarterly basis all you need to do is dip into the red once in that three month period and you will be charged the fee. If charges are monthly you will only pay one month’s fee.
- What are the charging period dates? If you dip into the red at the end of the month for just a few days before being paid you would expect to pay only one month’s bank charge. However, if one charging period ends and another begins in those few days you will be overdrawn in two charging periods - twice the bank charges! Among banks operating this double-charge is First Direct.
- What rates does your bank charge on agreed overdrafts? Avoid banks that charge a monthly fee on top of any interest rates. The best banks will even offer a buffer zone: go overdrawn up to a small limit of, say £50, and there is no overdraft charge at all.
- Does your bank charge extra fees? For example, overdraft arrangement fees? Many banks charge you a fee for arranging an overdraft. But if you can find one that does not, you could save yourself up to £30.
- What access do I have to my account? At a minimum, it should include telephone access until late evening, plus some weekend coverage. Internet banking, which allows you to manage your finances, pay bills and switch cash around on the web, is probably best.
- Can I set up direct debits and standing orders over the phone? Some will let you set up both, others only a direct debit.
- What other bank charges do I have to pay? Free banking as long as you are in credit is best.
- What access do I have to branches and ATMs when I need them? How extensive is my bank’s network of ATMs?
- What is the cash-card limit? Can you withdraw up to £250 in one go from a cash machine? Are they easily accessible from your home or office?
- What is the bank’s reputation for service? Friends and colleagues will be happy to share their experiences.
- If the bank gets something wrong, will it compensate me? Ask: you may be surprised at the answer.
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Before moving money or opening/closing accounts:
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- Check what rates would apply at different balances. It may pay you to increase your balance, where possible.
- Windfalls. Before closing an account check that you do not lose any entitlement to windfall payments/shares.
- What if you have a mortgage/other loan with your bank? Consider any future relationship which could be placed at risk by switching.
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Copyright The Financial Times Limited 2008
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