MSE News MoneySavingExpert.com News 2010 July Nationwide revamps current account with charges shake-up Nationwide revamps current account with charges shake-up

The change is part of a shake-up that will see the building society end fee-free overseas use from November (see the Nationwide kills cheap overseas spending MSE news story).

While those new fees will appear later this year, from Monday, the building society will offer the travel cover to all new Flexaccount customers, up to those aged 65, who meet the minimum monthly funding amount.

So if you earn at least £10,500 a year, the equivalent to working a 35-hour week on minimum wage for anyone aged 22 or older, you'll qualify.

Existing Flexaccount customers who are under 75 will get also get the cover if they've credited their account with at least £750 a month for the last three months, provided they have a Nationwide Visa debit card. Cash card holders are excluded.

Eligible existing customers will be written to and covered immediately on receipt of the letter.

If you want the travel cover but don't currently meet the pay-in criteria, you must use Nationwide's managed account service to switch all direct debits and standing orders, then credit the account with £750 for three months.

Sole account holders will get a single policy and joint account holders will get joint cover. The policies will be underwritten by UK Insurance Ltd, and have good payout records (though see the Cheap Travel Insurance guide for full details on how cover works).

Although you should fund the account monthly, the travel insurance won't become invalid straight away if you fail to do so.

Steve Blore, from Nationwide, says: "There's no process in place to revoke the travel insurance if account holders miss crediting their account. It will remain in existence.

"Although if it becomes a regular occurrence, accounts will be reviewed. But substantial notice will be given to customers before policies are terminated."

Changes to overdraft charges too

Nationwide is also making big changes to its overdraft charges from 1 November, which could leave those who frequently breach their limits substantially better off. Customers will also have forewarning of the charges they are likely to incur.

As it currently stands, if you have a paid reserve (an agreed overdraft where payments will be honoured if you enter it) and breach your limit, you won't be charged, but there's a £30 charge for breaches of unpaid reserves (the threshold which when breached payments will not be honoured).

Now the building society is standardising both, with a fee of £15 for charges paid or unpaid, with a £20 buffer zone. Nationwide is also introducing a 'charges upper limit' which means customers won't be charged more than £95 a month in fees.

This means if most of your charges are currently 'paid', you'll be worse off under the new system. But if your charges are usually 'unpaid', then you'll be paying less. Also, if you regularly accrue a lot of charges per month, there is now a cap.

Other banks often charge up to £35 a pop for overdraft breaches (see the Bank Charges Comparison tool).

Customers will also have the option to switch off their reserve limit. By doing so, you won't be charged for going beyond your limit using a debit card or ATM, but payments will not be honoured. Charges will however be made for standing orders, cheques paid with a guarantee card and future payments, even though these will not be honoured.

Chris Rhodes, products and marketing director for Nationwide, says: "People might be better or worse off from this depending on how many of these items they use.

"The absolute point is if you have items paid you will be worse off now, but we're telling you what that limit is."

Other changes to the account

Nationwide is also offering Flexaccount holders who meet the £750 per month funding requirements a preferential loan interest rate of 7.7% APR. This is a 'typical' rate which means at least 66% of people who apply must get it. All other loan applicants would receive a higher "personalised" interest rate.

Access to mortgage borrowing of up to 90% loan-to-value will be available too (that is, you could borrow up to 90% of your home's value, if accepted - though use a mortgage broker. See the Cheap Mortgage Finding guide).

Controversially, the mutual is also increasing how much it charges for foreign spending. At present it doesn't charge an exchange rate fee (also known as a 'load') in Europe, and just 1% for all transactions outside the continent. It also doesn’t charge for overseas ATM withdrawals.

From November, there will be a 2% load everywhere outside the UK and each cash withdrawal will incur a £1 fee (see the Nationwide kills cheap overseas spending MSE news story).

Better bank account options

Although an improvement to the account, Nationwide purports the travel insurance is worth up to £80. Yet, depending on your requirements and the payout levels, single cover annual European travel insurance is readily available for £14 to anyone under 50, or £17 for anyone older.

Family and couples policies can be had for £28 if all are under 50 or £34 if someone is older (see the Cheap Travel Insurance guide).

If you don't need travel insurance or can easily avoid incurring bank charges, Nationwide's Flexaccount can easily be beaten.

If you never go into your overdraft and earn over £14,700 per year, Santander offers bank account switchers 5% in-credit interest on the first £2,500 for a year with its 'Preferred In-credit Rate' account. You also get a lump £100 bonus.

If you use an overdraft, switch to Santander's 'Preferred Overdraft Rate' account and you'll be given 0% for 12 months on borrowing (see the Best Bank Accounts guide).

Again you must earn at least £14,700 per year.

Further reading/Key links

Cut the cost of banking: Best Bank Accounts and Compare Bank ChargesGet holiday cover from £14 a year: Cheap Travel Insurance