Current accounts

The big high street banks still dominate domestic banking despite frequently offering uncompetitive products - especially current accounts.  We are now becoming more and more accustomed to shopping around - so if we are comfortable with the idea of remortgaging, switching credit cards and mobile phone companies, why do we insist on staying with the same bank we've been with for years?

Our research shows that people can save up to £78 a year by switching to the best current account.  If you have a typical account from one of the largest five banks, with some paying as little as 0.1% interest you could earn a measly £1 a year on a balance of £1,000. If you can keep a high-interest-paying account sufficiently in the black, you could earn more than a hundred times more for very little effort.

Banks and building societies must follow strict guidelines that make switching your bank account quick and easy. Banks have three working days to pass information to your new bank. This must include details of all your direct debits and standing orders.

There are several ways of making the most of your current account:

• Interest rates: Always shop around for the best interest rates, and look out for high charges on overdrafts and other services.
• Bank charges: Check what the authorised and unauthorised overdraft fees are to avoid paying over the odds if you go into the red. Banks will charge you a fee as high as £25 if a cheque or standing order bounces due to insufficient funds in your current account. Always check you have sufficient funds to meet your obligations and avoid being left out of pocket when it comes to bank charges.
• Going abroad: If you're planning to use your debit card abroad, make sure you contact your bank to understand what charges you are likely to incur. Some cards charge as much as £1.50 for every overseas purchase, as well as additional foreign exchange fees ranging from 2.75% to 3%. They may also charge fees of 2.5% or a minimum charge of £2.50 every time cash is withdrawn from an ATM. The Nationwide debit card offers a good solution for spending abroad as it does not charge any fees on cash withdrawals or purchases abroad.
• When spending on plastic abroad, watch out for Dynamic Currency Conversion. This is when retailers overseas convert purchases into sterling instead of using the local currency and charge a fee of up to 4% on top. Always insist that the local currency is used or pay in cash instead.
• Packaged accounts: Some current accounts throw in extra freebies, such as free travel insurance, a bonus interest rate,  or breakdown cover on your car, but many people don't use the perks on offer so work out what you need and already have before opting for one of these current accounts. There may also be a catch, such as having to pay in a minimum amount each month, or having to pay a monthly fee for the benefits package.