A Guide to Current Accounts
Current accounts are the most common type of account and come with all of the basic features you’d expect like debit cards and overdraft facilities.
Over the course of this comprehensive guide we’ll go over the various types of current account available; explain the various charges and involved; and run you through a few of the things you should bear in mind when choosing yours so that by the end, you’ll have all of the information you need to get the best current account today.
Types of Current Account
There are a fair few different types of current account available in the UK at the moment and picking the right one is the first step towards getting the perfect account to suit your particular needs.Standard Current Accounts
Standard current accounts are very straightforward and come with a cheque book, a debit card and, usually, an overdraft facility of some kind.
Standard current accounts won’t normally come with any monthly fees or hidden charges and tend to come with pretty low interest rates, though this will of course depend on the bank in question.Basic Bank Accounts
Basic bank accounts are similar to standard current accounts but are more stripped back and are generally aimed at customers with poor or limited credit histories.
They will usually offer all of the basic services that you’d get with a standard current account, but without a cheque book or overdraft facility.Student Accounts
If you’re in higher education, whether undergraduate, postgraduate or any kind of degree equivalent course, you’ll most likely be eligible for a specialised student bank account.
Student accounts tend to come with interest-free overdraft with varied limits, and often give the account holders various other perks like free railcards.Youth Accounts
Aimed at the younger population youth accounts are available from most banks and are, essentially, stripped back standard current accounts with limited features.Premium or Packaged Accounts
If you feel like you could afford to pay a monthly fee for your current account then you could benefit from a range of added extras from free breakdown cover to Netflix subscriptions.
Whether or not these accounts are worth the money you’d spend on them will depend on both the actual retail price of the extras offered and on whether or not you’d actually take advantage of all of the perks that come with the account in question.
So if you’re chosen premium current account comes with free mobile phone insurance and breakdown cover but you don’t drive then even if both are offered at a much lower cost than they would be otherwise, you’re not going to be getting a good deal for your money.
If you’re willing to pay for your account then you should hunt around and you’ll be able to get one that comes with a great set of benefits.
Compare premium current accounts online with Money Expert and we’ll show you the best packaged deals with the best added extras available.
Charges Associated with Current Accounts
Aside from the monthly fees associated with premium accounts, there are various different charges that you may incur while using your current account, including:
- Fees for using your account or associated debit card abroad,
- Interest on your overdraft or penalty fees for unauthorised overdrafts, and
- Penalty fees for any payments, cheques, or direct debits that bounce due to insufficient funds.
Your bank will also most likely charge you for providing any of the following:
- Banker’s references,
- Banker’s drafts, or
- Duplicate statements.
To get a full breakdown of any of the charges that are associated with your current account, get in touch with your bank or check your account’s documentation.
Things to Consider When Picking a Current Account
The first thing you should think about when you’re choosing a current account is what exactly you’ll be using it for and whether or not a specialised account, like a student account, could be right for you.
This will include an assessment of whether or not you’ll want any of the optional extras you can get if you pay for a premium account, as well as whether or not you think you’ll need to take advantage of an overdraft facility.
Another thing you might want to consider is how often you travel, as there are various accounts available with benefits for those who do. These include accounts that charge no commission on foreign transactions or that offer free travel insurance as part of a bundle deal.
You’ll also want to consider things like whether or not you’re likely to want to be able to contact your bank 24/7 and, of course, how near you are to a local branch if you need to go in often.
To see how the different current accounts on the market match up to one another, use Money Expert’s free current account comparison service. We’ll show you a list of the best current accounts on the market so that you can be certain you’ll get the one that’s right for you.
Current Accounts and Interest
The interest you earn on any money stored in your current account is calculated as an annual equivalent rate, or AER.
Generally, interest rates on current accounts are lower than on, say, savings accounts, but there are various high-interest current accounts available that generally require a minimum monthly or yearly deposit.
When you open up a current account, you’ll generally be given two rates, or AERs:
- One for interest earned on your balance, and
- One for interest that you’ll pay if you are to go overdrawn.
The best accounts will have a high rate earned on credit, but a low rate applied to any overdrawn funds.
7-Day Switching Guarantee
Legislation brought in in September 2013 has simplified the process of switching between different current account providers.
All you need to do is fill in two forms:
- A Current Account Switch Agreement, which opens up the new account, and
- A Current Account Closure Instruction Form, which closes the old one.
You’ll be able to keep using your existing account right up until the actual switch goes through and when it does, your balance will be transferred over along with any direct debit payments and things like your salary.
You’ll also benefit from protection that means that for 13 months after the switch date, your old current account provider will be legally obliged to transfer over any payments that are accidentally made into your old account.
Implementation of the 7-day switching guarantee was designed to make the banking market more competitive and to force current account providers to improve their services to retain old customers and bring in new ones at the same time.