Dump your bank for a lifetime of savings

Don't put up with poor service - it's easier to switch current accounts than you think

Three years ago, Which?, the consumer group, launched its Switch with Which? campaign to persuade people to change bank. So far, the drive has had only modest success. The big four high-street banks - Barclays, HSBC, Lloyds TSB and Royal Bank of Scotland-owned NatWest - generally score poorly on product comparisons and also suffer in customer satisfaction surveys. Yet they still have a market share of more than 50 per cent between them.

However, the big four are clearly beginning to feel rattled. Last week, Barclays launched a new current-account deal, aimed at recruiting more customers. It follows a flurry of activity from rivals over the past year - HSBC and Lloyds TSB, for example, have both improved their current accounts in recent months.These deals are a response to competition from new entrants to the current-account market, as well as to existing rivals, several of which have upped their game over the past year.

Changing your account is worthwhile. Which?'s latest research suggests moving to a better bank could save you £12,000 over your working life compared to sticking with your mediocre current-account provider.

The first step towards making those savings is recognising that switching does not have to be a nightmare. "There is a real fear factor - consumers worry about their wages, mortgage payments and so on, and think their existing banks will make it hard for them," says Nick White, head of personal finance at price-comparison service Uswitch. "They also tend to think that if they get into trouble they are much better placed with a bank they have been with for a while."

In fact, neither perception is accurate. Under the Banking Code, your existing bank must provide details of information such as your standing orders and direct debits within three working days of receiving a transfer request from your new account provider. And all the banks now operate switching services, doing almost all of the transfer work for you.

Equally, financial services companies all subscribe to the same credit-reference agencies. So the fact you have not been a longstanding customer of a particular bank won't prevent you getting fair treatment if you run into money problems, as long as your overall record is good.

Choosing a new bank is a question of deciding what you want from a current account. The Which? campaign started by pointing out to people that the big four often offer a lousy deal on interest rates - both what they pay you if you're in credit and what they charge when you're overdrawn. But while no-one likes being ripped off, many people say they are less interested in interest rates when it comes to current accounts. What they want most is a bank that won't mess up, because their current account is the base from where all their finances are run.

The good news is that there is often a crossover between banks that offer decent interest rates and those that have good records on customer satisfaction. For example, in Which?'s most recent survey, the internet bank Smile came top for satisfaction. It also pays 3.25 per cent interest on credit balances, and charges 9.9 per cent on overdrafts.

By comparison, Barclays, HSBC, NatWest and Lloyds TSB all scored poorly in the Which? survey. Equally, of the four, only Lloyds pays more than 1 per cent interest, and all the big banks are more expensive on overdraft charges.

To get the best deals from current accounts, you usually have to pay at least a certain amount in each month - typically £500 or £1,000. This is well below the average take-home pay of £1,400 in the UK.

Meet the latter requirement and you can earn 4.89 per cent from Alliance & Leicester or 3.93 per cent from Lloyds TSB. Halifax and Nationwide Building Society offer the next best interest rate, of 3 per cent, or in the former case, you can opt for a cashback deal, where you get a payment worth 1 per cent of all your debit-card spending up to £10,000 each year.

One exception to the minimum payment rule is Cahoot, which offers 4.17 per cent annual interest on its current account. The internet bank's overdraft rates are also reasonable value, starting at 10 per cent, depending on your credit rating.

For borrowing, Alliance & Leicester is currently running an interest-free introductory offer, while Halifax's Moneyback account and the Smile account are both charging just 9.9 per cent on overdrafts, while Intelligent Finance offers 9.8 per cent. The best of the lot, excluding special offers, is Nationwide's 7.75 per cent.

Andrew Hagger, from analyst Moneyfacts, says the key is how you use your bank account. "Increased competition between the banks is good news, but before moving to a new provider check to see if the account is suitable for your own circumstances."

Customers who are regularly overdrawn, for example, should look at these rates more carefully than what they will earn when in credit. Also check whether banks offer an interest-free buffer, allowing you to go overdrawn by a small amount without paying any charges at all. At Nationwide, this buffer is worth £30, rising to £500 at Smile.

Similarly, tread carefully with packaged accounts, which can muddy the waters. Typically, these deals carry a monthly fee, in return for which you get additional services such as travel insurance and breakdown cover on top of basic banking. This is fine, as long as you are actually saving money by using the account this way.

Take NatWest's Advantage Premier deal. For £16.50 a month, you get breakdown cover, airport lounge access, extended warranties on household goods and discounts on NatWest insurance. But of this, only the breakdown cover has widespread appeal - and almost £200 a year is a lot to pay for that.

In any case, these perks - if that's what you are looking for - are often available elsewhere. Alliance & Leicester's Premier Plus account, for instance, is free and offers worldwide travel cover and preferential deals on A&L credit cards.

The new Barclays deal, which it claims will shake up the current-account market, is a variation on the packaged accounts theme. Additions Plus offers a £5,000 free overdraft for 10 months, plus worldwide travel insurance for a year for a family, and several good deals on other Barclays services. Even better, the bank is waiving its £12 monthly fee for 10 months for new customers.

However, Stuart Glendinning, of price comparison service MoneySupermarket, warns: "The risk with all packaged accounts is that a typical account holder may not take advantage of all of the benefits - and in Barclays' case, the £12 monthly fee is significant."