Customers 'should look beyond headline interest rates'

Current account customers should consider all elements and not just a high headline rate of interest before switching banks, according to uSwitch.

Following the release of an eight per cent current account by Abbey the comparison site has reminded customers that while they could earn more than nine times as much interest with the account than with the ‘Big Four’ banks, it is a "headline grabbing" rate to attract new business.

The new account only offers the high rate for the first year, after which its interest falls to 2.5 per cent. So, while in the first year a customer with £500 balance would earn £40 pounds, in the second that would drop to £12.50.

According to the website, customers with Halifax’s high interest current account, would earn only £30.85 in the first year, but would continue earning the same over three years, giving them a total interest over three years of £92.55 compared to £65 with Abbey.

An Alliance & Leicester spokesman also pointed out that Abbey’s offering features an overdraft rate of 16.9 per cent, compared to the building society’s 5.9 per cent.