Your current account is likely the most frequently used financial product in your daily life. From swiping your debit card to paying bills and making bank transfers, your current account is essential. It’s where you receive your income, whether it’s from your job, pension, or rental income.
In the UK, there are approximately 75.6 million current accounts held by customers, according to market intelligence firm Mintel. However, the term “current account” encompasses a wide range of options.
While standard accounts exist, there are also more elaborate options available. These include accounts with cashback perks, packaged accounts with added insurance extras, and specialist accounts for specific customer groups, such as students.
In this guide, Telegraph Money will take you through the different types of current accounts available and help you determine what might work best for you.
Most high street banks offer current accounts to anyone over the age of 16, although some may require a minimum age of 18 for certain features like an overdraft.
Standard current accounts are typically free to open. How you can open an account depends on the provider. Traditional banks often allow you to open an account in person at a branch, via post, phone, or online. Digital challenger banks like Monzo or Starling offer the convenience of opening an account quickly through an app.
Regardless of how you open the account, the provider will require proof of identity, usually in the form of a driving licence or passport, as well as proof of address, which can be a recent council tax or utility bill. You may need to take these documents to a branch, send photocopies, or even take a picture on your phone.
If you want an account with an overdraft, a credit check will be necessary. Your maximum overdraft limit may be revised based on your credit score.
Basic Current Account
There are approximately 7.3 million basic bank accounts open in the UK, according to government data. Since 2015, the UK’s nine biggest personal current account providers have been required to offer a basic account to customers who were previously unbanked or did not qualify for a standard current account.
A basic account functions similarly to a standard current account, allowing deposits, withdrawals, debit card payments, and standing orders. However, it does not offer additional features like an overdraft or a cheque book. There may also be limits on daily withdrawals.
Standard Current Account
A standard current account allows you to make and receive payments. If it doesn’t come with any extra features, besides a potential overdraft, it is usually fee-free.
If an overdraft is not provided as standard, you may have the option to apply for one or extend your existing limit through a credit check.
It’s important to understand the costs associated with an overdraft, as providers often charge high interest rates, usually around 40%. Banks may also offer packaged accounts with additional services like insurance or commission-free currency exchange for a monthly fee. If you’re considering a packaged account, it’s worth comparing prices to see if you can find the same services elsewhere at a lower cost.
High-Interest Current Account
As the name suggests, high-interest current accounts offer interest on your balance. If you tend to keep cash readily available, this can be a good way to boost your savings. However, if you typically transfer money out of your account each month, the interest may not be as beneficial.
Some current accounts offer interest rates as high as 5%, but they often come with certain requirements such as a minimum number of direct debits and a monthly deposit. For example, Nationwide offers 5% interest on deposits up to £1,500 and an interest-free overdraft for 12 months on their FlexDirect account, with the interest rate dropping to 1% after the introductory period.
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