What types of current account are available?
There are three kinds of current account – basic, standard and premium. Standard and premium current accounts suit most people best, offering a debit card, some kind of authorised overdraft (subject to approval) and a cheque book. Premium accounts also offer some kind of return - from good interest rates to cash back - often for a monthly fee.
Basic accounts, designed for those with poor credit histories, are more limited. They provide payment cards but there's no cheque book or overdraft, and they almost certainly won't pay interest – but they should also be fee-free. Those looking for more information on basic bank accounts should read this guide.
What's the best current account for me?
Choosing the wrong current account can be very expensive, so it's well worth researching the best account for our needs. Getting the right one can save us a considerable amount, and even make us a bit extra each month.
Generally, the higher the returns offered, the more the account is likely to cost – so people who regularly go into the red should look for the cheapest overdraft rather than an account that rewards them for being in credit. For those who stay in credit, the higher our average balance the more benefit we'll get from a premium current account offering high in credit interest.
Whatever other features our ideal account will have, it'll be easy to access however we bank - in person, over the phone or online. Some banks still need us to pop in to one of their own branches for some tasks – so even if we do most of our banking online, it's worth checking how close the local branch is.
How much interest can I earn?
While many current accounts offer little or no interest, a handful of providers offer high rates for in credit balances. The best rates tend to come with conditions on minimum monthly deposits and direct debits, with some accounts withholding rewards any month we go overdrawn. For this reason, premium accounts are better suited to those who know they can always stay in credit.
To compare high interest accounts look for the AER, or Annual Equivalent Rate, then for the minimum or maximum balances on which interest is payable. Interest isn’t the only reward available, however. Some current accounts offer cash back of some sort, and for those who are always in credit but sometimes not by much, these accounts can be better value.
Can I get a free overdraft?
An overdraft is a temporary loan from the bank; like other loans, the cost of that borrowing can vary. Whoever we bank with, a planned or authorised overdraft will always be cheaper than an unauthorised or "informal" overdraft, because the latter suggests we're not managing our finances properly.
Most banks offer a "buffer" of some sort to cover occasional overspends, but some also offer more generous authorised overdrafts free of charge, ideal for those who only go overdrawn by a relatively small amount. Those who need more should look at how each bank charges for the facility: some levy a flat daily rate, while others charge interest; some also impose a one-off fee any month we use the overdraft.
To compare the banks that charge interest on overdrafts, look for the Equivalent Annual Rate, or EAR. This can vary considerably from bank to bank, and some charge different rates for different accounts, or depending on how much we're borrowing. Daily charges and flat fees are attractive because they're simple to calculate, but whether they're cheaper than paying interest depends on how often we need the overdraft, and by how much.
How do I apply for an account?
All current account applications are subject to a credit check, which not only gives the bank an idea of our financial history but can help verify our identity; this is useful in online applications where we can't easily supply the usual documents. Typical applications require three years of address history, plus details of our monthly or annual income, so having two or three payslips is useful.
Those wanting to switch banks completely should have their existing details to hand so they can apply to use the Current Account Switching Service at the same time. This does almost all the work of transferring existing arrangements to the new account, ensuring payments to the old account are forwarded automatically, and so on. There's more on how the Switching Service works in this guide.
If one of the accounts above seems suitable, click on the "apply now" button to visit their site and find out more about their particular requirements - there's no obligation to commit at this point.
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