Current accounts that offer a competitive rate of interest in return for customers depositing a minimum amount of funds each month are not always as good as they might appear, moneysupermarket.com has said.
Having a 'minimum funding clause' attached to current accounts
is common at the moment, the comparison website says, but many customers are blinded to them by the attractive interest rates
and other features, and end up getting more than they bargained for, in the form of fees.
Some of the benefits of choosing a current account which require customers to pay in minimum funds of £500 to £1,500 a month can include an interest free overdraft, and an interest rate that can even beat some of the leading savings account deals, but "there is no such thing as a free lunch," moneysupermarket.com warns.
Customers should check the penalties for falling behind on paying in the minimum funds before they sign up for an account, moneysupermarket.com urges, because there "can be severe." Penalties can include such things as being charged overdraft interest, a drop in the in-credit interest rate, or even the account being closed by the provider.
Kevin Mountford, head of banking at moneysupermarket.com, said: "The penalties for not paying enough money into your current account can be harsh, some banks may even close the account entirely. Ultimately, account holders have to decide if there is a reasonable chance they will fail to fund the account as required, and if the rewards outweigh the penalties.
"Minimum funding requirements should not pose too much of a problem for those in regular employment and earning a fixed salary. But anyone not drawing a regular wage, or facing a pay cut or a reduction in overtime, should think twice about these deals."
Those current account customers who are looking for a new deal should compare deals, and look at more than just the interest rate on offer, Mr Mountford continued, because there could be small print attached to an account which might make it unsuitable for their needs.
"The best method of choosing is to work out exactly how you intend to use the account, and make sure that any product you apply for ticks all the relevant boxes," he added.Compare current accounts »
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