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It is said people are more likely to get divorced than break up with their bank. Just over 1m Britons switched accounts in the year to March, according to payments group Bacs — representing 1.6 per cent of active personal current accounts.

Meanwhile, the big four high street banks — Royal Bank of Scotland, Lloyds, HSBC and Barclays — control about 80 per cent of the UK current account market.

The Competition and Markets Authority believes this is wrong, and that we should be shopping for better deals. But like people who fear leaving their lover because they lack confidence about finding anyone better, UK bank customers are paralysed by inertia.

“Bank charges are complicated and opaque and many customers think it is difficult and risky to change banks,” the CMA said in a lengthy paper published on Tuesday.

If you are befuddled by banking, here is a guide to knowing when to switch.

Understand your overdraft habit

Banks made £1.2bn last year in overdraft fees. And more than a quarter of Britons fall into overdraft territory by the 17th day after payday, according to a 2014 survey of 2,000 current account holders by budgeting website Thinkmoney.

Even wealthy people can slip into the red, particularly if they have several large payments going out each month for mortgages, car leases, school fees, pensions or club memberships.

So before shopping around for current accounts, first scrutinise whether you are ever overdrawn, and by how much. The fees on overdrafts can outweigh most current account benefits or rewards. According to the CMA, more than half of overdraft users underestimate their usage.

Work out what your overdrawn days cost

If you have an overdraft facility arranged with your bank, you may be paying more than £100 a year to use it, as the table below shows.

If you go into debit without any such arrangement, fees can be much higher — sometimes up to £100 per month.

“If you are going overdrawn a lot, the way to reduce the charges is to agree a monthly facility with your bank, which can often be done online,” says Andrew Hagger, an independent personal finance expert who carries out research for the banking industry.

Look for the best interest rates

If you are always in credit, take advantage of this. Banks need your money so they can lend it to other people, so make sure you are earning as much as you can from them.

Interest rates may be at record lows, but some institutions are better than others at paying you for the use of your cash. TSB’s Classic Plus account, for example, pays 4.9 per cent interest on credit balances up to £2,000.

Santander’s 123 account pays 3 per cent interest on balances of up to £20,000, and offers cashback on utility bills and credit card purchases. If you keep a credit balance of at least £3,000 and spend £250 a month on household bills, you will earn £88 a year in interest and cashback.

Weigh up all benefits against potential costs

Higher interest-paying accounts can be punitive if you do go into debit. Santander charges £1 a day for use of its authorised overdraft, for example, capped at £20 per month. So someone who is overdrawn for one week every month would pay £84 in annual fees.

The TSB account has a similar downside. According to Mr Hagger, someone who is £400 overdrawn on average for four days a month would pay £81 a year in fees. That compares to just £2.93 with First Direct.

And if you do switch . . . 

Make sure your new bank is signed up to the Current Account Switch Service, a joint initiative between the industry and government that enables people to switch banks within seven working days. The process should be painless, but to minimise potential problems try not to arrange the switch for a day when you know most of your direct debits are going out.

Annual costs of an authorised overdraft compared
ProviderTariff£400 for 4 days per month£600 for 7 days per month£1200 for 10 days per month£2000 for 12 days per monthAverage annual cost
First DirectInterest at (14.85%) 15.9% EAR (first £250 interest free)£2.93£11.96£46.38£102.53£40.95
M&S BankInterest at (14.85%) 15.9% EAR (first £100 interest free)£5.86£17.09£53.70£111.31£46.99
Post OfficeInterest at (13.97%) 14.9% EAR£7.35£19.29£55.11£110.23£48.00
Metro BankInterest at (14.0%) 15.0% EAR£7.36£19.33£55.23£110.47£48.10
Nationwide Building Society – FlexDirect50p per day£24£42£60£72£49.50 No fees for first 12 months
HSBC AdvanceInterest at (16.58%) 17.9% EAR8.72£22.89£65.41£130.82£56.96
Nationwide Building Society - FlexAccountInterest at (17.44%)18.9% EAR£9.17£24.08£68.80£137.61£59.92
The Co-operative BankInterest at (17.44%)18.9% EAR£9.17£24.08£68.80£137.61£59.92
Tesco BankInterest at (17.44%)18.9% EAR£9.17£24.08£68.80£137.61£59.92
Santander – 123 (note £5pm account fee)Daily fee £1.00 (Max £20 per month)£48£84£120£144£99
Barclays – Bank Account75p per day to £1,000; £1.50 per day up to £2,000; £3 per day over £2,000£36£63£180£216£123.75
Lloyds Bank – Club LloydsInterest at (18.36%) 19.94% EAR (first £100 interest free) plus £6 monthly overdraft usage fee£79.24£93.13£138.40£209.62£130.10
TSB – Classic PlusInterest at (18.36%) 19.94% EAR (first £25 interest free) plus £6 monthly overdraft usage fee£81.05£96.30£142.92£215.06£133.83
NatWest/RBS - SelectInterest at (18.28%) 19.89% EAR plus £6 monthly overdraft usage fee£81.62£97.24£144.12£216.24£134.81

Halifax

£1 per day up to £1,999; £2 per day £2000 to £2,999; £3 per day for £3,000 plus£48.00£84.00£120£288£135
Source: moneycomms.co.uk
Copyright The Financial Times Limited 2017. All rights reserved.
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