Current account customers considering switching accounts face "an ever growing challenge" to find the right deal after it was revealed that the fees charged on authorised overdrafts have recently reached a record high.
In the same week that the Competition and Markets Authority (CMA) promised to make it easier than ever to switch accounts, customers have been warned to pay particular attention to the charges that are levied, particularly for those who use an overdraft.
Research from Moneyfacts revealed that the usage fees on authorised overdrafts have now reached a new high of £6.93 per month, compared with an average fee of just £1.26 per month when data was first collected in April 2008.
The proportion of non-fee charging current accounts levying a usage fee for an arranged overdraft has also soared, from 24% eight years ago to 56% today.
Customers who have been using interest-paying current accounts to boost their savings are also facing disappointment on the news that these variable rates could now be doomed to upcoming cuts, following the Bank of England's decision to lower the base rate of interest to 0.25%.
According to Moneyfacts, three quarters of the current account market currently pay no interest on balances whatsoever, a figure which is now likely to rise further still.
Another revelation was that monthly account fees are on the rise, with deals that do offer rewards typically charging a fee for the privilege. With some 92% of all current accounts for day-to-day customers charging an account fee and/or an overdraft usage fee, Rachel Springall, finance expert at Moneyfacts, said it was "little wonder consumers feel they have little incentive to switch".
"It's clear to see that free current accounts are a dying breed, which is why consumers have to work extra hard to find an account that suits all of their needs for a reasonable cost," she added. "The majority of bank customers hold their account with the 'big four' banks and around 60% of customers have kept the same current account for over a decade – which is why there needs to be an immense shift in the market to encourage these customers to switch elsewhere."
Referring to the switching incentives that have become a predominant feature of the banking market in the last few years, Ms Springall said that customers should be picking a new account "based on the overall cost rather than an upfront perk".
"In the years to come, consumers will be hoping for an easier way to compare deals and for more evidence to show it is not 'risky' to switch," she added. "They will also expect charges to become much fairer and for more notifications on when they dip into the red."
If you are tempted to switch, before you start looking make sure you know what kind of account will suit you. If you never touch your overdraft, then a high interest current account may be a great idea, but if you find yourself regularly dipping into your overdraft, then a deal with low arranged overdraft fees and/or interest rates will be preferable. You can find out more about what to look for by reading our guides, and then once you're ready to start searching the market, check out our current account best buys.
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