CURRENT ACCOUNTS
The nature of these accounts differentiates them from savings accounts, which could also be considered bank accounts but are not generally used directly for receiving and spending cash. A current account will typically give you a cash and/or debit card and a chequebook and may also have an agreed overdraft facility (essentially a form of credit should you need it).
Aside from the basics, there are many options to choose from when it comes to how you want to run your account – which is only natural as everyone has different needs and desires. These are catered for through a variety of accounts and account features.
Some current accounts offer a high rate of interest, but this is usually only payable on the first few thousand pounds in the account and will require a certain amount of money to be paid in per month. Most accounts can be accessed in various ways, such as in branch, via the internet, by post and by telephone. Some accounts can also be accessed at the Post Office and many can now be operated via smartphone app.
Having a bank account can be a gateway to accessing other financial products, such as credit cards or mortgages where the providers need to be sure that repayments can be made. They will probably look at how you have run your bank account as part of their credit checking process.
Access to the account
Make sure you choose an account that you can access how you need. Some accounts are only accessible via internet and phone, while others allow you to deal with your account through branches and even the Post Office. This can be especially handy for paying in cheques or cash.
While most banks will now offer contactless as standard on their debit cards, this easy payment method may not be available with every account. So, if you want to be able to spend small amounts of money without having to put in your PIN number, you may want to ask your bank whether they allow contactless payments before committing.
Cash machines
Similarly, you’ll want to make sure that your account allows access from a wide range of cash machines and that these transactions are free. Just about all bank accounts give you a card so you can get money out of cash machines.
Most transactions will be free of charge, but if you use cash machines in places like petrol stations, amusement arcades or nightclubs, you may be charged. It’s worth understanding what type of cash card you’ll get, and whether it is widely accepted, e.g. at Link machines.
FAQ’s
A current account lets you keep your money in a safe place while still allowing you to spend it, transfer it, use it to pay bills and have more added to it. Current accounts usually come with a cash or debit card, which you can use to make purchases or withdraw money from your account.
A current account suits anyone who wants or needs full access to the banking system. People with either no credit rating, or who have had credit problems, may not be granted a current account, but should be able to get a basic bank account.
There are various account types to suit different people. The exact current account that would be most suitable to your needs will depend on several circumstances but given the number of accounts available on the market, there should be a suitable deal to be found. As account perks and features change over time, it’s probably a good idea to keep an eye on the market and consider changing your account if you’re not getting the most out of your current one.
To find a suitable current account, look out for the following:
Fees
Some accounts charge a fee, normally to offset the cost to the bank of some other benefit available with the account, such as a lower overdraft rate, higher interest for in-credit balances, or a higher overdraft buffer amount. Depending on your circumstances, the extra features could outweigh the fee, making it beneficial regardless.
Other benefits that may be available on packaged accounts with a monthly fee are travel or breakdown insurance, discounts in certain shops or access to executive lounges at airports. While these extras could add up, remember that free banking is still widely available, so don’t pay for things you don’t need.
Funding requirement
You may be required to pay in a minimum amount of money per month. Usually, this restriction is applied to high interest current accounts, which offer a decent in-credit interest rate in exchange for your commitment and regular income. Aside from a minimum monthly funding amount, these accounts may require you to hold several direct debits on it, to make sure your account with them is your main banking product.
Credit interest
Competitive interest rates – some even inflation-beating – are available on high interest current accounts, but they may only be paid on the first part of the balance. After this, interest may not be paid at all, or at a very low rate, so you may want to maximise your returns by placing any money above this amount in a separate savings account.
Note that these accounts do tend to come with high overdraft rates, so you should only consider an account that offers credit interest if you’re not someone who regularly goes overdrawn.
Overdrafts
Overdrafts are basically a form of credit; they’re a facility that allows you to overspend, so should be avoided if possible. There are two sorts of overdraft: arranged overdrafts, where the bank agrees an amount by which you can go overdrawn, and unarranged overdrafts, which occur when you either exceed your arranged overdraft or go overdrawn without having an arranged overdraft.
If you are likely to dip into the red on your bank account, you should consider an account that charges a low rate and/or fee for arranged overdrafts or allows you to go overdrawn by a certain amount (called a ‘buffer zone’) before you get charged. This can prove to be very valuable if your income and outgoings are nearly the same and your account balance goes near or below zero on a regular basis.