Moneyfacts: OFT current account findings

Michelle Slade, analyst at Moneyfacts.co.uk, comments: "The big named banks have for a long time relied on brand and customer loyalty. As highlighted by the Office for Fair Trading (OFT), the result has been that many consumers find themselves in accounts paying little or no credit interest and/or being charged high fees when they have insufficient funds in their accounts.

"The fact that these institutions pay no or little credit interest is disgraceful. With inflation as high as it is, anyone with money with these banks is effectively losing money.

"Many consumers think that it is too much hassle to switch accounts, particularly as today many of us have numerous direct debits set up from our accounts. However, nearly all institutions have a switcher service, which transfers your direct debits for you, taking the stress out of switching accounts.

"By finding the best account to suit their needs, customers could save hundreds of pounds. If you regularly leave a balance in your account, opt for an account paying a high rate of credit interest. If you regularly live in the red, choose an account with a low overdraft rate.

"With many families' finances already stretched to breaking point, the likelihood of them incurring a penalty charge for having insufficient funds in their account increases. This means that the families being penalised are those who can ill afford to pay the penalty charges, which can be as much as £38.

"The cost to the banks for bouncing a cheque or returning an unpaid direct debit is nowhere near this much. Hence why the report from the OFT highlights that the banks make £2.6bn from these charges alone.

"Particularly in these uncertain financial times, consumers need to make sure they are lining their own pockets and not those of the banks."