Many Britons are losing hundreds of pounds each year due to common banking mistakes, according to financial experts. Sticking with a traditional bank, using an overdraft, and leaving too much cash in low-interest accounts are among the top errors that can be easily avoided.
HSBC, Lloyds, NatWest and Barclays dominate the current account market, holding three-quarters of all accounts. However, none of the big four rank in the top five for service quality, according to a survey by the Competition and Markets Authority. New challenger banks such as Chase, Monzo and Starling offer better apps, savings rates and features, and are rated higher by customers.
Switching banks is easier than many think, thanks to the Current Account Switching Service guarantee, which completes the process in seven working days. Incentives such as £175 from First Direct and £150 from NatWest make switching even more attractive. However, customers should check terms and conditions, as some offers require a minimum monthly deposit or direct debits.
Overdrafts are another costly mistake. Around 9.7 million people are overdrawn by an average of £709 each month, with typical rates between 35% and 50%. Running a £709 overdraft at 39.9% would cost £283 in interest over a year. A cheaper alternative is a 0% money transfer credit card, such as Tesco Bank's 14-month 0% card with a 3.99% fee, which would cost just £28.28 to clear the same debt.
Finally, leaving too much cash in a zero-interest account is a missed opportunity. The Bank of England estimates £280bn sits in accounts earning nothing, losing value to inflation. Experts recommend moving excess funds to savings accounts or using them to clear expensive debts like overdrafts.
