article: John Ashton, professor of banking at Bangor University, studied 17 years of bank account data to examine the costs faced by customers. He told the BBC that it was well documented that overdrafts were an expensive form of borrowing. What was overlooked was the "cost" of keeping large deposits in an account. By doing so, customers were missing out on much higher levels of interest that would be paid in a better home for their savings. "It is a surprise how large these amounts can be [in current accounts] - many thousands of pounds," he said. It might be possible to manage a current account to make the most of the system but, for many, the best way to get value for money is by switching to another current account altogether. Bank customers could save £70 a year on average by switching their account to another provider, an investigation by the Competition and Markets Authority (CMA) concluded. Why? The CMA explains: "We looked at the average charges for a customer who was £500 in credit and had a number of foreign exchange transactions in a year, and tried to work it out, if they switched to a different type of account, and we found that, if they switched to a reward account under which they received cashback rewards and interest on their credit balances, they would make the £70 saving." For those who go into the red, the savings made by switching would be even greater, the CMA suggested. The average overdraft user could save £140 a year. Heavy overdraft users could save £260. Switching is relatively simple. It is a seven-day process and all existing regular payments, incoming and outgoing, are automatically diverted to the new account. Customers, for the most part, remain unmoved despite the simplicity of the system. Last year, 1.03 million current accounts were switched last year, compared with 1.15 million the previous year. That is a fraction of the 68 million active current accounts in the UK. Commentators suggest, despite a big advertising campaign, customers do not swap owing to a lack of trust in banks to ensure direct debits are automatically switched to the new account. They also say that the complexity of these accounts and the lack of a clear "price" make it enormously difficult to decide between the options. There are 269 different current account options to choose from for UK consumers, according to financial information service Moneyfacts. One of the High Street giants - Barclays - has 69 different options on its own, although they are not all available to everyone. Customers who do attempt to find a better deal are met by a blizzard of numbers when comparing the charges levied by each account. For overdrafts, there may be authorised overdraft fees, overdraft arrangement fees, overdraft review fees, as well as the same again for going into the red without prior authorisation from the bank. To add an extra layer of complexity, the cost of an overdraft is not always clear from the interest charged. For example, two banks charge 15.9% interest
summary: The most affordable way of holding a bank current account, an academic has concluded, is to keep small sums in it but to never go overdrawn.