Money news, advice and predictions for savers and spenders.
By Jeremy Gates
As billions more pounds of taxpayers' cash has been pumped into Britain's ailing banks, holders of more than 40 million current accounts might hope that the management of their financial affairs is about to be transformed.
Surely, we must get something for all that money. As the Government stumps up another £33.5 billion, the bailout bill for Royal Bank of Scotland and Lloyds Banking Group soared to £76b - and the total 'bank rescue' bill hit £20,000 for every person in Britain.
In this latest deal, forced through by the European Union, about 1,000 bank branches could change hands, profitable insurance companies like Churchill and Direct Line must be sold by RBS - and ancient banking names could return, such as Williams and Glyn's Bank.
Lloyds's hapless shareholders, who have lost millions since the bank's disastrous 'rescue' of HBOS in autumn 2008, must stump up another £21b in the biggest rights issue of all time with no chance of a dividend before 2012.
Meanwhile, out of the wreckage could step Tesco Bank, and maybe a Virgin Money Bank too, if somebody finds the cash while Sir Richard Branson's team adds marketing fizz.
Their first target? Maybe the £2.65b charges on unauthorised overdrafts that the Office of Fair Trading thinks form too big a part of £8b profits made on current accounts each year.
Most bank customers, however, will see little immediate benefit from this upheaval, says Annie Shaw at CashQuestions.com.
"Customers of existing banks, whether under new ownership or not, are unlikely to see any change in the trend towards higher - if more transparent - charges, cautious lending and the gradual ending of free current-account banking," she says.
Launching any new bank obviously isn't easy. Insurance giant Standard Life, a big name in personal finance, has thrown in the towel after trying for 11 years of an economic boom to build its own bank.
After losses totalling £45 million, it sold out to Barclays for £226m.
Kevin Mountford, head of banking at moneysupermarket.com, says that more competition generally heralds a better deal for consumers, so new entrants to the market would be welcome.
But a moneysupermarket.com survey reveals that only 4% of consumers would trust a supermarket brand to look after their finances, and only 10% would expect better service from a supermarket than a bank.
Only a quarter said they would take out a credit card with a supermarket brand.
Mountford thinks the best thing to emerge could be a simpler, faster service when switching accounts.
"The way you are shoehorned into an organisation that you don't like must be changed," he says.
"We need a healthy switching environment which allows people to move out around more freely.
"I think Tesco, which already offers a range of financial services, will do something sooner rather than later. They might not wait for an asset sale, which could take three or four years to unfold.
"Any new entrants in the marketplace will have to do something which sets them apart, in product innovation or service standards - maybe branches opening 8am-8pm."
Andrew Hagger at Moneynet.co.uk believes that fresh blood is needed in the banking sector, with simple well-priced products, to give customers better choices.
"Customers don't want to continually chase best-buy rates or have to try to figure out pitfalls hidden deep in terms and conditions of ever-more complex accounts," he says.
"High Street banking giants have got used to having it their own way, and have got more complacent as competition has dwindled.
"Innovative new players who can balance shareholder and customer expectations have a window of opportunity to convince millions of consumers that they represent a credible banking alternative and one worth switching to."
Of course, nobody really knows how fast the changes in retail banking will come along.
Meanwhile, savvy bank customers - particularly the two-thirds who stay in credit each month - can find better value accounts by sifting through those already available, mostly outside the banks in distress.
"Everybody needs to ask themselves how they use an account - are they usually in credit or in the red? From there, you can find a best buy," says Hagger.
Nationwide's Flexaccount, for example, has attractions for first-time buyers because Britain's biggest building society is offering 90% mortgages to account holders.
The Flexaccount debit card slashes the cost of purchases and cash withdrawals abroad, and is much cheaper than rivals, even after a 1% charge outside Europe imposed this year.
Hagger also tips Halifax Reward account as a best buy for those in credit.
"There is a £5 credit paid in every month when you pay in a minimum £1,000, and no charges if you stay in the black," he says.
"Once in the red, you are clobbered: if your overdraft is under £2,500, the charge is £1 a day. Over £2,500, it's £2 a day and any unauthorised borrowing is £5 per day."
Hagger also likes Alliance & Leicester Premier Direct, which requires a minimum monthly deposit of £500. For the first 12 months, there's 6% interest on the first £2,500 and 0% overdraft charges.
A&L has been offering a £100 gift to new applicants, if they use its switching service. The campaign could be extended beyond the cut-off date of November 8.
Abbey's Credit Option account also pays 6% on the first year on balances to £2,500, if at least £1,000 per month is paid in.
For customers needing an overdraft, Hagger tips A&L's Premier Account and the First Direct account, which requires a minimum monthly salary cheque of £1,500 per month and offers a £250 interest free overdraft facility.
First Direct, the online subsidiary of HSBC, also offers a £100 sweetener to some new customers, and anybody dissatisfied after six months might get another £100 to go elsewhere.
Cahoot, the online bank in Santander's group, combines a decent 1% rate on current account credit with one of the best rates - 11.7% - on authorised overdrafts. Unauthorised overdrafts cost 21.9%.
Although Smile, the Co-op online account, pays only 0.1% on credit balances, it charges 15.9% on both authorised and unauthorised overdrafts, and simply requires customers to have their monthly salary cheque paid in.
Co-op Bank, charging 15.9% on both authorised borrowing and unauthorised interest, has attractions for those juggling to keep in the black.
Mountford is also a fan of A&L Premier Direct. He likes First Direct for its service, and says HSBC Premier Service offers an excellent range of services for affluent customers who want assets managed efficiently, rather than debts.
The same theme runs through most best-buy accounts: millions of customers who run accounts efficiently and stay in the black accept a poorer service than they could easily find elsewhere, if they bothered to look.
:: Information: Attractions of various current accounts are listed on Moneynet.co.uk, Moneysupermarket.com and Moneyfacts.co.uk.
Poundnotes
:: Time to treat yourself to a new car, says M&S Money, which is reducing the rate on personal loans from 9.9% to 8.7% APR (typical) on advances of £7,500-£15,000. Offered with the M&S Car Buying Plan, it means borrowers can defer a fixed percentage of the loan. At the end of the term, they have three options: keep the car and keep making monthly repayments until the whole loan is repaid; keep the car and pay off the rest of the loan with a lump sum; or sell the car and use the money to pay off the rest of the loan.
M&S says its loan business boomed in the run-up to new car registrations in September, helped by the Car Scrappage Scheme.
Sainsbury's Finance, which thinks motorists could save £229 million by haggling on car prices in the next six months, offers loans at 8.0% APR (typical) on £7,500-15,000.
M&S enquiries: 0800 363 400 and www.marksandspencer.com/loans. Sainsbury's Finance: 0500 405060 and www.sainsburysfinance.co.uk.
:: Savers should realise that the average bonus paid on instant-access savings accounts is now bigger than the average rate paid to savers, says MoneyExpert.com.research.
When the bonus is removed on a specified date, savers get much less than the headline rate which drew them in.
The website says the bonuses, which now average 0.9% against 0.2% a year ago, are a cunning way of masking the fact that the average instant-access account now pays only 0.7%.
:: British shoppers should head to Eastern Europe, notably Prague and Budapest, to find best value in Christmas markets, says International Currency Exchange.
"With the pound hovering only slightly above parity with the euro, many travellers will opt for non-euro countries for a shopping trip," says ICE's Andrew Hamilton.
"Prague, with the current value of the koruna, offers great value, and Budapest is also a likely hot-spot this year."
See www.iceplc.com for more details.
:: Despite suggestions that Child Trust Funds might have to be abolished if public spending is slashed, David White at the Children's Mutual claims they are the most successful savings scheme in the UK.
More than 4.6 million children have CTF accounts, with more than £2 billion stashed away for their future. A £24 monthly direct could produce a lump sum at 18 of £9,750, says White.
:: High-five savers:
Phone No Rate Account Period Deposit Interest paid
Skipton BS 0845 717 1777 5.35% (F) Fixed Rate Bond 30/11/14 £500 Yly
Barclays via branch 5.25% Savings Bond 46 Five Year Bond £500 Yly
West Bromwich BS via branch 3.34% Branch Bonus 2 Instant £100 Yly
Citibank www.citibank.co.uk 3.30% Flexible Saver 6 Instant £1 Mly
Investec Bank 0845 366 6333 3.29% High 5 Three Month (P) £25,000 Mly
:: Top-five borrowers:
Phone No Rate Period Max% Adv Fee Incentive
HSBC (Rem) 0800 494999 2.99% discounted for two years 75% nil Yes
First Direct (Rem) 0845 610 0100 2.99% variable for term 60% none Yes
ING Direct (UK) 0845 603 8888 3.09% for term 75% £695 Yes
Co-operative Bank 0800 633 5286 3.24% to 31/01/13 75% £995 Yes
The One Account 0845 610 1060 3.75% for term 75% none Yes
Code:
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
