Current account funding clauses

Many of the ‘best' current account deals available at the moment carry a minimum funding clause, typically requiring the account holder to pay between £500 and £1,500 per month into the account. However, there is no such thing as a free lunch, and new research from moneysupermarket.com reveals the penalties for failing to make the minimum funding amount can be severe.

The benefits for paying the required amount of cash into your account include 0 per cent on authorised overdrafts, and highly competitive in-credit interest rates up to five per cent - beating many traditional savings accounts. But it will cost you if you don't keep up the minimum funding - your overdraft rate might rise, your in credit AER might drop, and some providers even warn they may close your account. .

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.

"If you're looking for a new current account, don't simply chase the best rate; terms and conditions on market leading offers tend to be a little onerous and might mean that the product is not suited to your 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."

For more information, visit moneysupermarket.com