4 Which bank account?
The good news is that the market for bank accounts – also known as ‘current accounts’ – is fairly competitive, so it’s important to shop around for the best deal to suit your needs.
You can use online comparison websites or the websites of consumer organisations like moneysavingexpert [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] or Which?. Note, though, that comparison websites do not always provide a full picture of the relative attractions of products. Use a checklist of your own to support your research into which account is right for you.
What should you look for?
- An account that pays you interest on your balance
- An account that enables you to make one-off and regular payments online
- If you are 18 or over, select an account with an overdraft facility to enable you to borrow funds – ideally just temporarily – when you have a shortage of money. Carefully check the interest rate payable when you go overdrawn, and make sure you have a plan to get your bank account back into credit.
To choose your account apply this checklist.
- Does this account pay interest? Interest is the money that financial institutions pay periodically on the balance of money you have in your bank and savings accounts. This interest is expressed as a percentage – for example 5% per annum (p.a.), where ‘per annum’ means ‘per year’.
- Do you get a cash card? This enables you to withdraw money from your account via a cashpoint (or ATM).
- Do you get a debit card? When you buy things using this, the amount you pay is deducted automatically from your bank account. A debit card can also be used to withdraw cash from your account via an ATM.
- Do you get a cheque book? Some trades people and organisations still require cheques to be used to pay for their services, but using cheques to buy things or to pay for bills is increasingly uncommon.
- If you are aged 18 or over: do you get an overdraft facility? If so, what is the maximum amount you can be overdrawn? What fees and interest apply to this overdraft facility?
- Are there any perks for opening the account – like a bonus paid in when you open the account, or vouchers?
- What fees could you be liable to? An example would be fees charged when you withdraw cash from your bank account while you’re overseas.
Start to draw up a checklist for own circumstances now.
If you already have a bank account, which of those features and facilities do you have?
If you don’t have a bank account, which of those features and facilities are essential for you?
Which are not essential but still ‘nice to have’?
All bank accounts should enable you to set up standing orders or direct debits. Both enable you to make regular payments to other people or organisations or other accounts that you might have. The only major difference is that direct debits have to be set up by the organisations to whom you are making payments (on instructions provided by you). By contrast you have the responsibility for setting up, changing or cancelling standing orders.