A current account is a type of account held with a bank to manage your day-to-day money. It provides access to a range of banking services such as receiving payment like wages, benefits or pensions into your account. You can also make payments out of your account such as bill. You can make payments in numerous ways:
- Debit card
- Cheque
- Transfer via online banking or telephone
- Set up direct debit
A current account will typically issue you a debit card, cheque book and may offer an overdraft facility. Most can be accessed in various ways such as going into a branch, via internet portal, and by post or telephone. Many banks will offer access via a smartphone app.
Types of current accounts
There are various types of current accounts available in the UK offered by banks and building societies.
- Standard Current Account
These are very straightforward and don’t normally come with any monthly fees or hidden charges. They tend to offer very low interest rates, depending on the bank.
- Basic Bank Account
Similar to standard current accounts but are a stripped back service for customers with poor or limited credit histories.
- Student Account
If you’re in higher education, you will likely be eligible for a specialised student account that will provide added benefits such as an interest-free over-draft facility with varied limits as well as other perks like free rail cards.
- Youth Account
Designed for the younger age of customer, they are stripped back standard accounts with limited features.
- Premium Account
For a monthly fee, you could benefit from a range of extras and benefits that vary from insurances to subscription services. Whether these are worth the monthly fee or not will depend on if the services provide value for money and are taken advantage of.
Who can apply for a current account
- Age: you need to be over 16 years to open a current account with some banks the minimum is higher at 18 years. If the account is for someone under 18 years, it may be possible to open the account with help of a parents.
- Good credit history: banks will run a credit check when you apply, which means they will look at your financial situation prior to accepting an application.
- Proof of identity and address: – banks or building societies will ask for proof of your identify and address
What to look out for
- Monthly fees: for keeping the account open, some banks may charge a monthly or annual fee
- Minimum balances
- Overdrafts: depending on the facility there can be various charges applicable if used
- Cash machine transactions: with most cash machines free to use, some privately owned will apply a charge if used to withdraw cash of up to £5 per transaction
- Insufficient fund penalties: if there aren’t sufficient funds in your account when you make a payment, banks can charge up to £25
- Same day transfer: sending money by CHAPS may cost up to £35
Current account interest
Interest rates on current accounts are generally lower than savings accounts. Relatively, there are various higher-interest current accounts available that generally require a minimum monthly or yearly deposit. You will generally be provided two rates of AER, one for interest earned on your balance and a second to pay if you’re overdrawn.
7 Day Switching Guarantee
Launched in September 2013, the Current Account Switch Service ensures your incoming and outgoing payments will be moved to your new account by your new bank within seven working days. Before this, switching took about 18 to 30 working days. It also makes the following guarantees:
- The service is free to use and you can choose and agree your switch date.
- They will take care of moving all your payments going out (for example, your Direct Debits and standing orders) and those coming in (for example, your salary).
- If you have money in your old account, they will transfer it to your new account on your switch date.
- They will arrange for payments accidentally made to your old account to be automatically redirected to your new account. They will also contact the sender and give them your new account details.
- If there are any issues in making the switch, they will contact you before your switch date.
- If anything goes wrong with the switch, as soon as they are told, they will refund any interest (paid or lost) and charge made on either your old or new current accounts as a result of this failure.
What to do if things go wrong If you’re unhappy with anything to do with your bank or building society, it is best to speak to them first. They have to investigate any complaints and provide a clear answer within eight weeks. If they don’t send a response within eight week, or you’re still unhappy after they have, you may be able to complain to the Financial Ombudsman Service
