Building society current accounts

By DARREN BEHAR
Updated:

 

Building societies decided to take on the big banks a decade ago by offering their own ranges of low cost current accounts. Since then, many of the top societies have become banks themselves. But their current accounts still tend to be best-buys.

So anyone unhappy with the service and value for money at one of the big four banks - Barclays, HSBC, Lloyds TSB and NatWest - should consider a move.

You are most likely to benefit from switching to a building society or former building society if you are regularly overdrawn. That's because the societies and former societies rarely charge monthly fees for using agreed overdraft facilities - as well as charging less interest on debts.

Doing the switch can save you several hundred pounds a year if you do dip into the red often. Barclays, Lloyds TSB and NatWest which charge £5 a month if you are overdrawn within agreed limits. They also charge high overdraft interest rates of up to 1.45% a month.

Far less expensive are Nationwide and little-known Leeds & Holbeck building societies, which charge 0.94% and 0.95% interest respectively. While Leeds & Holbeck has a £5 monthly fee for using an overdraft, like the big banks, Nationwide charges nothing, making it an even better deal for customers.

Halifax charges 1.12% if you stay within agreed limits while Abbey National charges 1.05% and Woolwich just 0.87%. Of these three only Woolwich charges a monthly fee of £3.50.

Even if you don't go overdrawn very often, it can pay to switch to a society or former society account, as traditional high street banks also pay paltry interest rates on credit balances. NatWest, Barclays, Lloyds TSB and HSBC pay just 0.1% before tax, compared with 1.45% from Nationwide and 0.25% from Halifax and Woolwich.

Overall, the best societies for current accounts are Nationwide and Leeds & Holbeck and Norwich & Peterborough.

The best former societies are Halifax, Abbey National, Woolwich and Northern Rock.

All will take on new customers for current accounts even if you have an existing overdraft. So it really is possible to fight back against the big banks.

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