A current account is probably your most important account. These accounts handle your inbound and outbound payments and act as the ‘nucleus’ of personal finance products. Let’s find out more about how they work.
A Transaction Account
A current account is a ‘transaction’ account that is designed to offer you easy access to your cash. Your income gets deposited into this account, while most of your outgoings – from your mortgage to your cash withdrawals – come out of this account.
A current account allows you to set up automatic payments, such as Direct Debits or Standing Orders, for anything that is paid periodically. This is useful because many companies offer discounts or cheaper rates for customers who opt to pay by this method.
Free Accounts or Paid-For Accounts?
Most current accounts are free to use, provided that you remain in credit. Some banks offer additional features, such as insurance, for a monthly fee. These are often known as packaged accounts.
If you spend more money than you have in your account, you’ll go into what’s called an overdraft. Most banks will allow customers an ‘arranged’ overdraft, which is less costly to use. But if you need to dip into the red frequently, it can be worth looking for an account that has a better deal on overdrafts, as the charges can really mount up.
So, what sort of things might you consider when it comes to choosing your bank account?
1. What do I want from my current account?
Some current accounts now offer decent interest rates, worth up to 5%. Some even have opportunities to earn cashback. However, these perks often require a minimum monthly deposit of up to £1,000 per month, so make sure you can meet this if you wish to reap the rewards.
Packaged accounts can offer a significant discount on buying products separately, but make sure you’re eligible to use them before you commit to anything.
2. Does it benefit me in other ways?
It might be worth thinking about your finances more broadly when it comes to choosing your provider, because lenders frequently make better products available to current account customers.
For example, if you’re interested in getting a mortgage or changing your existing mortgage, you might find that lenders offer better deals to their current account customers.
3. How do I switch my bank account?
Switching between banks is now easier than ever, thanks to a new seven-day switch service. Simply apply to a new bank, provide them with the details of your old account, and everything will be transferred across automatically within seven working days. Payments to and from the old account are redirected for over a year, and you’ll be guaranteed a refund if anything goes wrong.
If you’re not happy with your existing current account, think about what you need and get applying for a new one.