Opening a current account is often considered the first and most important step in managing your finances, as it offers a range of benefits and features that can make everyday transactions easier and more efficient. In fact, according to the latest research, 97% of the UK population currently holds a current account for managing their everyday expenses.
You might want a safe and secure place to deposit your income and manage your day-to-day spending. Or you might need an account to pay bills, set up direct debits, and access other financial services.
There are various types of accounts available, each with its own unique features, benefits, and drawbacks. That’s why it’s important to have a good understanding of current accounts and how they work.
At Finance Rate, we believe that everyone deserves to have access to clear and unbiased financial information. That’s why we provide you with straightforward guidance to help you make informed decisions – and the best part? It’s all completely free!
We want you to feel confident in your financial decisions, and we’re committed to being your trusted resource every step of the way. Let’s embark on this journey together and equip you with the knowledge you need to make the best decision for your financial future.
What is a current account and who are they for?
A current account is a type of bank account that allows for regular deposits, withdrawals, and transactions. It is primarily used for managing day-to-day financial activities such as paying bills, making purchases, and receiving payments.
Current accounts are available to anyone who meets the eligibility criteria set by the bank, which typically includes proof of identity and address. They are especially useful for those who need to manage regular expenses and transactions, such as individuals who have a steady income and need to pay bills, make purchases, and transfer money to family and friends.
Once you become an account holder, you’ll usually then be able to:
- Gain access to an online banking platform which allows you to view your account balance and transaction history, set up automatic payments, and transfer funds to other accounts.
- Send and receive money to and from other bank accounts. This can be done through a variety of methods, such as online transfers, standing orders, or direct debits.
- Pay for items with a physical card. Debit cards are linked directly to your current account balance, and allow you to make purchases in-store, online, or over the phone.
A bank account serves as the foundation of our financial lives. It is where we receive our salaries, pay our mortgage payments from and purchase essential items to sustain our daily lives. Without a bank account, it can be difficult to access financial services and conduct everyday transactions.
Choosing the right fit: A breakdown of the 5 types of current accounts
|Standard Current Account||A standard current account is the most common type and is available to most people. It typically comes with a debit card, online banking, and the ability to set up direct debits and standing orders. Some standard accounts may also offer an overdraft facility, although this is subject to credit checks and interest charges.|
– Usually free to apply
– Low interest rates
– Debit card and online banking
– Arranged overdraft
|Basic Current Account||A basic current account is designed for those who may have a poor credit history or are unable to meet the eligibility requirements for a standard account. It offers basic banking services, such as a card and online banking, but does not usually include an overdraft facility or other extras.|
– Restrictions on cash withdrawals
– Cash card rather than debit card
– Suitable option for those with bad credit
|Student Current Account||A student current account is tailored for those in full-time education. It often comes with various features and benefits, such as interest-free overdrafts, discounted or free banking, and access to student discounts and perks. These accounts may also offer rewards and incentives for using the specialised account, such as bigger overdrafts.|
– Interest on money put into the account
– Higher overdrafts (usually at a charge)
– Ability to set up direct debits online
|High-Interest Current Account||A high-interest current account is an account that allows customers to earn interest on their balance, often at higher rates than standard accounts. However, to qualify for the higher rates, certain conditions such as maintaining a minimum balance or making a minimum number of transactions each month are usually required.|
– May have to pay in a certain amount of money on a monthly basis to qualify
– Can offer up to 7% interest
– Suitable for individuals seeking to earn interest on their balance
|Cash-Back Current Account||A cash-back current account is created for people who want to earn rewards for using their accounts. These accounts offer cashback on purchases made with the account, typically ranging from 1% to 5% of the total spend. Some cash-back accounts may also offer other rewards, such as discounts on shopping or dining, or access to exclusive events and experiences.|
– Earn up to 15% cashback from selected retailers
– Receive monthly perks (at the bank’s discretion)
– Get bonus saving offers and interest
How to work out which type of account is suitable for you
When it comes to selecting a current account, it’s essential to consider your specific financial needs and preferences. Here are some factors to keep in mind:
- Identify your banking needs: Before choosing an account, decide what banking features you require such as a current account for daily transactions or a savings account with a high interest rate.
- Evaluate account fees: It is important to compare fees associated with different types of current accounts. Some may offer free banking while others may have associated costs with transactions or require a minimum balance. This should coincide with your salary (ensure you can afford the costs).
- Consider interest rates: If you are looking to maximise the interest earned on your balance, seek out accounts offering competitive rates. Be aware of any conditions that may affect these rates such as minimum balances or regular deposits.
- Work out if you want additional benefits: When assessing account features, consider whether the added perks such as travel insurance, cashback rewards, or free overdraft protection will help you reach your financial goals. You may find that different banks offer Apps that provide additional perks (such as free coffee or cinema tickets!)
- Review customer service ratings: It is important to evaluate the customer service of a bank. Research online reviews or consult with peers to make sure you are receiving the best quality of support and advice.
By considering these factors and evaluating the different types of current accounts available, you can select an account that aligns with your financial goals. We recommend shopping around and getting the advice you need before applying.
Opening your first current account: What do you need?
Are you ready to open your first current account in the UK? Taking financial steps to increase your independence is an exciting way to better manage your money.
Typically, bank applications can be processed within 2 days, so you can be set up to receive money in no time. However, we understand it can seem quite daunting, Here’s what you need to know to get started:
- Eligibility: UK banks usually require applicants to be aged 18 or above in order to open a current account. However, some banks may allow applicants aged 16 and up. Bear in mind that those aged between 0-17 years old could be eligible for a child bank account.
- Identification: When opening a bank account, it is important to verify your identity. This meets legal requirements, such as anti-money laundering regulations. To do this, you must present a valid government-provided document, like a passport or driving licence. If you are not from the UK, you may have to provide proof of residency or visa.
- Address verification: In addition to proof of identity, you’ll also need to provide proof of your address. This is to confirm that you live at the address you’ve provided and to help prevent fraud. Acceptable documents for address verification can vary depending on the bank, but they typically include recent utility bills, council tax statements, or bank statements that display your name and address. This is where you’ll also be sent your account details and new debit card.
- Employment details: If you’re employed, you’ll need to provide details of your employer and your job role. This information helps the bank assess your financial situation and determine which type of account is best for you. For example, if you have a high income and a stable job, you may be eligible for a high-interest account with additional benefits, such as travel insurance or cashback rewards. On the other hand, if you’re a student or have a lower income, you may be better suited to a basic current account with no fees.
- Initial deposit: You’ll typically need to make an initial deposit to open your current account. This amount varies depending on the bank and type of account you choose. Some accounts may require a minimum deposit, while others may have no minimum. Before opening an account, make sure you understand the initial deposit requirements and any associated fees or charges.
Opening a bank account for under 18s: The benefits of a child’s current account
A children’s account enables your child to take their first steps towards money management. Using a digital payment platform can be an efficient way for parents to keep track of their child’s allowance, savings, and other expenses.
Most of the time, a bank account for children usually comes with some restrictions, disallowing the child to access certain features for security reasons.
Individuals under 18 can access similar services from their bank account as those aged over 18. The main difference is that children are unable to borrow money, as their bank accounts do not offer overdraft options.
Some features include:
- The ability to withdraw cash
- Children will receive a card that they can use to purchase items from shops
- Some banks may allow account holders to set up direct debits or standing orders
- Children’s bank accounts typically offer the option of periodic deposits from a parent or guardian.
What are the benefits of opening up a current account for a child?
- Teach financial responsibility: A bank account provides a platform for children to learn about money management, budgeting, and saving. Many providers (such as GoHenry) have a child-friendly App to help under-18s navigate the banking world.
- Encourage savings: With a bank account, children can save their money and earn interest on their savings. There are also child savings accounts that are useful for depositing funds over the duration of their lives, giving them access once they reach the age of 18.
- Convenience: Having a bank account can make it easier for parents to manage their child’s spending money, track spending, and provide funds for expenses like travel expenses.
- Safety: Many parents opt to open a bank account for their children as a safe and secure way to hold money. This mitigates the risk of losing loose cash and ensures any large amounts of money that children are responsible for is safely locked away.
- Access to financial tools: Banks often provide online banking, mobile apps, and other resources which can help children and young adults understand money management and financial planning.
Switching your account provider: The general process
According to banking statistics from 2020, 61% of Brits have switched banks at some point in their lives. It can often be a good idea, as most banks tend to offer some kind of reward for switching – usually in the form of a monetary bonus.
The process may be slightly different depending on the bank and the type of account you’re wanting to switch to. However, all British banks and building societies now offer a complete switch service within seven days. This allows you to get set up with your new current account as quickly as possible.
The Current Account Switch Service (CASS) is a free-to-use service launched in 2013 – since then, over eight million customers have successfully switched accounts using CASS. The service was launched to prevent banks from taking their time whilst swapping bank accounts for their customers, ensuring the process takes a maximum of seven days to complete in full.
The Account Switch Service Guarantee ensures your new bank will switch your payments over and transfer your balance to your new account. Your old bank will also take control of closing your old account, so you don’t need to worry about completing the process yourself. This makes the process much quicker and easier for the person switching.
CASS is instituted by Pay UK – an organisation that is primarily known for running automated payment systems across Britain. There is no fee incurred for the customer when they switch bank accounts, making the process even easier.
If you want to switch your current account to another bank, you should follow these steps:
- The first thing to do is to shop around for a new current account that has the features you need. It’s also worthwhile checking to see if there are any deals or bonuses available – particularly if you’re torn between several accounts. Comparison sites like MoneySupermarket can be useful when comparing bank accounts.
- Once you’ve chosen a new account, you will need to complete an application form with the new bank. You’ll usually have to provide some personal and financial details as part of the application. You’ll also need to propose a date for your switch.
- Your new bank will talk to your old bank and they’ll complete the switch for you. Your banks will complete the switch in full, swapping your direct debits, standing orders, salary and any other payments.
- You’ll then receive all the information you need to start using your new current account, such as your PIN, debit/credit cards and your log-in details.
If you face additional charges when switching or you’re concerned about losing out on interest during the process, your new bank should refund you for these losses under the Current Account Switch Guarantee.
What are the benefits of switching current accounts?
There are many potential benefits to switching your current account provider. Different providers will offer different perks so it’s important to shop around and find the one that best suits your lifestyle and requirements.
Some of the main benefits of switching might include:
- Rewards: Some current accounts will offer you free rewards for switching. These rewards often come in the form of a cash incentive or other benefits such as discounts off your favourite stores, free cinema tickets, travelcards, and more.
- More control: Switching account providers might give you access to better services, such as a 24-hour helpline or mobile banking apps that allow you to manage your money at any time and in any place.
- Saving and earning money: You might be able to get a better interest rate when you switch account providers, which can help your money to grow. Some current accounts might also offer a lower overdraft interest rate or a higher overdraft threshold, which could be a huge advantage if you regularly rely on your overdraft to make payments.
Joint current accounts vs individual accounts
If you’re in a long-term relationship, you might want to consider opening up a joint current account.
Some people choose to have a joint account as well as an individual account, whereas others prefer to keep their accounts separate. Whichever option you choose will depend largely on your personal circumstances. If you’re interested in setting up a joint account, there are some things you need to know before getting started.
There are several benefits to having a joint bank account:
- You can keep all your money in one place, making life more straightforward for you and your spouse.
- It’s easier to arrange paying your bills, mortgage and rent, as you can ensure all payments are taken from one account.
- Using a joint account can help prevent arguments about money, as well as ensuring all finances are transparent between both parties.
If you trust your partner with your finances, using a joint account could make your life together a lot easier. However, there are also some disadvantages to using a joint account:
- If one party spends the money in the account and it becomes overdrawn, both users are liable for paying the money back. This applies even if you weren’t the person that originally used the money.
- If one person has a poor credit score, this may bring the other person’s credit score down too. When you use a joint account, your credit ratings become linked together.
- If your partner draws money out of the account and starts spending it on things it shouldn’t be spent on, you have no recourse to get the money back. Trust is a big factor when opening up a joint account and you need to consider what might happen if the relationship breaks down. Sorting out finances after a break-up can be difficult to manage.
- Sharing a bank account means you have less privacy from one another. However, you could still have individual accounts and keep your joint account for bills and other important joint payments
If you’d like to open a joint account, you should speak to the bank or building society to see what current accounts are available. The process is similar to opening up an individual account, although both parties need to complete an application to be eligible.
The rise of digital banks: How are they different?
A digital bank account is a relatively new form of banking. A digital bank account isn’t too different from a traditional bank account, although there are some differences. Most people will have used online banking in some form or other, but digital banking is exclusively used online.
With a digital bank account, all the functions are performed online, so there aren’t any branches you can go into to speak to somebody in person. However, there will usually be contact services available if you do need to speak to an employee about your account.
The fees tend to be smaller than using conventional accounts, and many digital banks offer services where you can use your debit card abroad without paying extra fees.
There are several digital bank organisations serving the UK at present. Some of the most popular companies include:
All digital banks are legally regulated by the FCA and the FSCS (Financial Services Compensation Scheme), so your money will still be protected in the same way as a traditional bank account.
If you’re considering opening a digital bank account, the following statistics may be of interest:
- The latest research shows that around 14 million British adults have at least one digital bank account.
- In 2023, the amount of Brits with a digital bank account has vastly increased. 24% of British people have a digital bank account, compared to 9% in 2019.
- One in four people with traditional bank accounts don’t trust digital-only banks;
- And one in three people plan to stick with a conventional bank account.
Whilst some people are suspicious of digital bank accounts, they’re fully regulated within the UK and can be much easier to use due to their digital nature.
Current account vs savings account: Key differences and benefits
Most people have both a savings account and a current account, whereas others choose to just have one current account that they keep all their money in. Both types of account are distinct from one another, with each one offering a number of benefits for the user.
Current accounts are usually used for day-to-day transactions – they’re also useful for paying things such as bills, rent and mortgage payments. Savings accounts, on the other hand, are more useful for saving money – whether you’re saving up for a holiday, a house deposit, or just a rainy day.
All accounts differ depending on the provider and the specific terms of the account. However, there are some key differences between savings accounts and current accounts.
|Current accounts||Savings accounts|
|Used for day-to-day transactions||Used for saving money|
|Interest isn’t always applied||Interest will be earned on your balance|
|Overdrafts are allowed||Overdrafts are not allowed|
|There may be a high minimum balance||Low minimum balance|
With some savings accounts, you may not be able to access the money for a certain period of time. On the other hand, current accounts give you access whenever you need to use your funds.
Many different types of savings accounts exist – some of the most popular ones at the moment are:
- Basic savings accounts – These accounts are what most people typically think of when they think about savings accounts. In most cases you can transfer money into your account whenever and however you want, although this may depend on the terms of the account.
- ISAs (Individual Savings Accounts) – ISAs allow you to save a certain amount of money and earn tax-free interest on the balance. You can only put a certain amount of money into an ISA each year – the current threshold is £20,000. Different types of ISAs exist, including cash ISAs and stocks and shares ISAs.
- LISAs (Lifetime ISA) – A LISA is an ISA that is more restricted, allowing you to save money for either a first time house purchase or retirement. You cannot draw your money out of a LISA unless you are using it to buy a house or retire. The British government adds a 25% bonus to your savings up to a maximum of £1,000 per year.
- Children’s savings accounts – Children’s savings accounts are available for anyone under the age of eighteen and are usually opened by a parent or guardian. Interest rates tend to be low, but they can help you to teach your children the value of money.
When opening a new current account, there are two main aspects you need to be aware of – overdrafts and interest.
Overdrafts allow you to borrow money through your current account – they’re not available with savings accounts. This may be particularly useful if you urgently need to pay for something but you haven’t been paid yet. They’re designed for temporarily borrowing money in short term circumstances to cover unexpected costs.
You’ll go into your overdraft if your balance goes below £0. Some current accounts won’t have overdrafts, so if you try and make a payment that takes you below this amount, the payment may fail. You’ll usually pre-arrange an overdraft with your bank or building society whilst setting the account up – they can often be arranged afterwards too.
Arranged overdrafts have limits – this may be something you can increase or decrease if you speak to your bank or building society. You may also have to pay interest on your overdraft if you go into it – the fees are usually calculated on a daily or weekly basis. However, some overdrafts have zero fees, making them worthwhile if you think you may need to use them regularly.
Unarranged overdrafts also exist, although they often have higher fees. An unarranged overdraft is used when your current account balance drops below £0 but you haven’t formally arranged an overdraft with your bank or building society. Using an unarranged overdraft may negatively affect your credit score, although you can use an arranged overdraft to build your score if you use it correctly.
If you use your overdraft too much, you may find yourself getting into debt, which may be hard to pay back if the negative balance is too high. If you’re unable to pay back the balance or you use your overdraft too much, your bank may demand you pay back the money at any time. They can also cancel your arranged overdraft if they feel they need to.
Because of this, it’s important to keep on track of your finances and ensure you can pay back any money spent within your overdraft, as well as the interest fees.
|Overdraft advantages||Overdraft disadvantages|
|You can borrow what you need when you need (up to the overdraft limit).||Your credit score may be negatively impacted|
|Arranged overdrafts can be flexible about when you pay them back||You’ll usually be charged interest for using your overdraft|
|You can extend or reduce your overdraft when needed by speaking to your bank or building society||The interest rate may be higher than other forms of borrowing|
Packaged bank accounts: Are they worth it?
Packaged bank accounts are current accounts that offer a range of extra features and perks in exchange for a monthly fee.
The specific benefits will vary depending on the account provider, but you can often expect:
- Travel insurance
- ID fraud insurance
- Mobile phone insurance
- Car breakdown cover
- Commission-free foreign currency
- Discounted or interest free overdraft
- Preferential rates on other financial products
- Offers and discounts, such as money off at your favourite stores
Packaged bank accounts might be good value for some people, especially if you intend to use all of the benefits regularly. But for others, the cost of the account might actually be higher than the cost of purchasing the benefits you want separately.
To decide if a packaged bank account might be right for you, here are some of the questions you should ask yourself:
- Do you need all of the benefits? If you won’t use all of the benefits included with your account, you’re likely to save money by purchasing the benefits that you do want individually.
- Does the insurance offer the level of cover you need? The insurance included might be very basic, or you might already have cover through another product such as your home insurance policy.
- Does the insurance have exclusions that make you ineligible? Travel and life insurance might have age limits or exclusions that prevent you from being able to claim this benefit. If you have a pre-existing medical condition, for example, you might not be covered by the travel insurance policy.
- Do the perks need activating before you can use them? Some banks and building societies require you to activate each service before you can use it. If you aren’t aware of this when you open the account, you might find that your insurance is invalid and you’ve been paying for something that you can’t use.
- Do you need an overdraft? If you’re considering switching to a packaged bank account just because you need an overdraft, you should ask your bank if they can add one to your existing current account first. Although the interest on overdrafts is often very low or nonexistent with a packaged bank account, the monthly fee could actually make it more expensive to use than a standard current account overdraft.
You should make a list of benefits that you actually need before deciding to open a packaged bank account and shop around to find options that meet your requirements.
Comparison websites such as MoneySavingExpert and Which? can be helpful when it comes to weighing up your options. Just bear in mind that not all comparison websites will give you the same results, so you should use multiple sites before making a final decision.
How many bank accounts can I open?
There’s no limit to the number of bank accounts you can open. In fact, a lot of people do have more than one bank account, opting to use a current account for everyday banking and a savings account to help them save for large purchases or unforeseen expenses.
However, keep in mind that having multiple accounts may lead to additional fees or charges, and it can be harder to keep track of your finances. It’s usually best to open accounts that meet your specific needs and avoid opening too many accounts.
On the other hand, there can also be multiple benefits to separating your money and priorities by different accounts.
What are the benefits of having multiple bank accounts?
There are numerous benefits to having more than one bank account, particularly if you have lots of different expenses or income streams to keep track of.
- Pool money for bills: If you live with your partner, it could be beneficial to open a joint bank account to cover your household expenses. This helps to make bill paying fair and straightforward, with each person transferring an agreed amount into the account each month.
- Keep track of your spending: Setting up separate bank accounts for different types of spending might help you to manage your money better and stick to your budget. For example, you might have one account for your monthly bills and rent/mortgage payments, another for your weekly grocery shop, and another that’s purely for treats and days out.
- Keep track of different income streams: If you have more than one job or receive income from renting out a property, it can be beneficial to keep your earnings in separate bank accounts. This can be especially helpful when it comes to completing your tax returns, as you can easily see exactly how much money you earned from each stream of income.
- Earn more interest: Some current accounts offer higher interest rates and extra perks than savings accounts, so it could be worth opening an additional account to take advantage of this.
- Keep your business income and spending separate: If you’re a business owner, it might be a good idea to open a business bank account to keep your company income and expenses separate from your personal current account. This will make it much easier to calculate tax and track how your business is performing.
- Access money if there’s an issue with one of your accounts: It’s wise to have a backup in case there’s a problem with your card or bank that stops you from accessing your money. [When TSB moved to a new IT system in April 2018, it’s estimated that roughly 1.9 million customers were locked out of their accounts](https://www.computerweekly.com/news/252528519/TSB-hit-with-huge-fine-after-IT-migration-disaster#:~:text=In April 2018%2C the bank,them%2C to the new platform.) for several days, with some facing problems for more than a month.
- Take advantage of perks and rewards: If you have a decent income coming into your current account each month, it might be worth opening an additional account to reap more rewards. Packaged bank accounts often include things like insurance and preferential overdraft rates to customers who pay a monthly fee.
- Try a challenger bank: Challenger banks are taking on traditional banks by offering improved, customer-focused services such as out-of-hours banking and free ATM withdrawals abroad. Some challenger banks like Monzo and Starling are purely app-based and offer customers a range of handy tools that help with spending tracking, bill splitting, and budgeting.
What should I be wary of when opening multiple bank accounts?
Although there are numerous benefits to having more than one bank account, there are also some potential drawbacks that you should take into consideration:
- It’s harder to keep track of your money: It’s much easier to pull up your balance on a screen and monitor your spending if all of your money is in one account. The more current accounts you put money into, the more difficult it will be to track your balances.
- You’ll be more at risk of incurring fees: Some bank accounts require you to have a minimum balance at all times to avoid fees. If you split your money between different accounts, you’re more likely to dip below those minimum thresholds and be charged. It’s important to be clear on any minimum balance requirements that your bank has in place before opening an account. Also, make sure you have enough money coming in to prevent any of your balances from getting too low.
- You could be more at risk of fraud: Most banks have solid security and fraud protection measures in place, but you’re more likely to be a victim if you have money spread across several accounts. The more bank accounts you have, the more opportunities cyber criminals have to access your money or personal data.
It’s also worth noting that some banks will set conditions that you must abide by in order to open a new current account. You may be expected to pay your salary into the account, or to set up a direct debit from the account. Other banks will let you open an account regardless, as long as you pass their credit check and pay money in each month. Consider what you intend to use your new current account for before choosing which bank to go with to ensure that you’ll be able to meet their requirements.
Take a good look at your personal finances before making the decision to open a new account. There’s no point opening a bank account that you don’t need, especially if you’re going to incur fees because of it. And bear in mind that applying for multiple bank accounts within a short period of time could negatively impact your credit score.
Should I open multiple accounts with the same bank?
Opening multiple accounts with the same bank could make it easier for you to keep track of your finances. You might even find that your bank offers additional perks or better interest rates if you open an additional account with them.
However, it’s important to shop around if you’re considering opening another account, as you might be able to find a deal that better suits your needs elsewhere.
How should I manage multiple bank accounts?
If you have decided that opening more than one bank account is right for you, it’s important to make sure you can effectively keep track of your money over several accounts.
Organisation is key to effectively managing multiple bank accounts. You might want to consider setting up a standing order so that your money automatically goes into the right account and you don’t have to worry about incurring fees.
Can I open a current account if I have a bad credit history?
It can be more difficult to find a current account provider if you have a bad credit history, but there are some options available.
Basic bank accounts allow you to store and deposit money, pay bills, and use online banking even if you have a bad credit history. These bank accounts are similar to standard current accounts for the most part, but they don’t offer an overdraft facility. This means they pose less risk to the account provider and reduce your chances of getting into debt.
Most UK banks offer a basic bank account option that will let you deposit money, receive money, pay bills, withdraw cash at cash machines, and set up direct debits.
It’s unlikely that you will be refused a basic bank account if you apply for one, but you will still need to make sure your identification documents are correct and up to date so that the bank can be sure you are who you say you are. Your application will be rejected if your documents are out of date.
Can a current account help to improve my credit score?
Opening a current account can help to improve your credit rating, provided you are able to demonstrate that you are responsible with your money.
You can work towards this by setting up regular direct debits to pay your bills and by ensuring that all of your bills are paid on time. This shows the account provider that you are reliable and means you’re more likely to be accepted for other types of bank account in the future.
Improving your credit score can also be as simple as making sure your bank has your correct and updated contact information and address, so be sure to inform your account provider of any changes as soon as possible.
Can I get a bank account if I’m unemployed?
Banks may ask about your employment status when you apply for a basic bank account, but this won’t impact their decision or your chances of being accepted.
As long as you provide correct and up-to-date information on your application, you will likely be accepted even if you are unemployed.
Comparison sites such as Go.Compare allow you to filter the available current account options to only show basic bank account options, which might be useful if you have a poor credit history or are currently unemployed.
Bounced payments: What they are and how to avoid them
A bounced payment occurs when there isn’t enough money in your current account to make a prearranged payment. In this situation, the bank will refuse to process the payment and may charge you a penalty.
The good news is that, in 2014, a new retry process was introduced by the Financial Conduct Authority (FCA) in collaboration with seven of the UK’s high-street banks. This process gives current account customers a second chance to avoid charges on bounced payments.
Standing orders, direct debits, and other prearranged payments can sometimes be taken early in the morning, which can cause issues if you arrange for your payments to leave your bank account on the same day that your salary is paid in. Before the retry process was introduced, this meant that your payees could attempt to debit your account before your salary was credited, resulting in multiple bounced payments and hefty charges.
The retry process gives customers until at least 2pm on the same day to pay the money into their account. Later in the day, the bank or building society will then try to take the money to cover the payment again.
If there is enough money in your account after the retry, then you won’t be charged an unpaid item fee by your bank – however, if your account funds are still too low after the cut-off time, you might be charged.
Your bank may notify you by phone or text if a payment bounces, giving you a chance to rectify the situation before charges are incurred. However, banks are under no obligation to do this, so be sure to keep a close eye on your account using online or mobile banking on the day your payments are due to go out to ensure your transactions have gone smoothly.
How to avoid bounced payments
- Find out if your bank offers a text alert service that lets you know when funds are low in your account, or when payments have failed
- If you are financially able to do so, build up an emergency reserve to ensure you don’t get caught out if your salary payment is late
- If possible, schedule your prearranged payments to leave your account the day after your salary is paid in
Note that cheques can take up to four working days to clear. If you’re relying on cash from a cheque to make your prearranged payments, make sure you cash it in well in advance.
What is ethical banking?
Ethical banks promise to only invest your money in socially and morally positive ways. They ensure that your money won’t be invested in anything that could have a negative impact on society, local communities, and the environment.
Many people choose to open current accounts with an ethical provider as they want their money to be invested in ways that reflect their own moral principles. Each bank has different principles and will choose to invest its customers’ money differently, so it’s important to find one that has a stance in line with your own beliefs.
The Co-operative Bank was the first UK bank to introduce ethical banking in 1992 and remains an option for those who want their money to have a positive impact on the planet (although it arguably became less ethical when it was bought out by US hedge funds in 2013). Despite this, the Co-operative Bank is one of the few ethical banks to offer current accounts.
Ethical banks provide their customers with a level of transparency that they might not be used to with other banks. They’re also more likely to keep their customers updated with news, plans, and practices that show you that your money is being used for the good of the planet.
Websites such as Ethical Consumer compare the ethical and environmental record of 31 UK current accounts to help you decide which one might be right for you.
Banks vs building societies: What’s the difference?
Although building societies offer many of the same products and services as banks, these two financial institutions are not the same.
Banks are typically listed on the stock market, which means they are owned by shareholders. Building societies, on the other hand, are owned and run by their members. This means that the people who bank, save, and borrow with them get a say in how the bank is run and how their money is invested.
Originally, the main business of building societies was savings accounts and mortgages. Some still only offer these products, but a number now offer a larger range that includes current accounts, loans, and credit cards.
Nationwide is the largest building society in the world, and the UK’s second-biggest mortgage provider. Other popular building societies include the award-winning Coventry Building Society and the Yorkshire Building Society, which are committed to a number of charitable causes including ending youth homelessness.
What are the advantages of using a building society?
Building societies have a few advantages over banks:
- Better interest rates: Building societies can typically offer better interest rates than banks because they don’t have to pay dividends to shareholders.
- Better customer service: Because building societies are owned and run by the customers, they are often considered to provide a higher level of customer service than banks. According to the Building Societies Association (BSA), building societies receive fewer complaints than banks and are better at handling any complaints they do receive.
- Supporting the local community: Local building societies tend to have outreach programmes that support the local community, and profits are often reinvested back into the local economy.
- Protection: Building societies are regulated by the Financial Conduct Authority (FCA), which helps to ensure that they act in the best interest of their members. The Financial Services Compensation Scheme (FSCS) also protects the first £75,000 of a customer’s money when it’s invested in a building society.
- More likely to lend to ‘risky’ borrowers: If you’re interested in taking out a loan, it could be beneficial to apply with a building society. Building societies are more likely to lend to people that the major banks might consider ‘risky’ (because of age, occupation, etc.), which means your chances of being approved are higher.
- Have your say: Because building societies are owned by the customers, you actually get to have a say in how the society is run. No member has to get involved if they don’t want to, but it’s good to know that you have these rights even if you choose not to use them. All building societies hold an Annual General Meeting (AGM) once a year that all members are welcome to attend and suggest resolutions to be discussed.
What are the disadvantages of using a building society?
Despite their numerous advantages, there are some areas where banks do better than building societies:
- Many building societies don’t offer current accounts. You’re likely to find more current account options with banks and might be better choosing a building society for your savings accounts instead. However, it’s still worth bearing building societies in mind when shopping around for the best current account offers.
- There are far fewer building societies than there used to be, giving you less choice. Those that still exist are strong and reliable, but many were taken over by existing banks in the 2000s. Back in 1910, there were no fewer than 1,723 building societies in the UK, but only 43 remain today.
- Banks tend to offer a larger range of products and services than building societies. A lot of building societies still only offer savings accounts and mortgages, whereas banks have a wide range of different account types to choose from.
Financial fraud: What to look out for
Financial fraud is when criminals steal money or other financial assets from people by deceiving them or stealing their personal details.
Criminals use various techniques to do this, including sending text messages, emails, and social media messages where they pretend to be someone you trust. They might also try to trick you over the phone or in person and could pretend to be your bank or even a close friend, colleague, or family member.
As fraud techniques continue to advance, it’s becoming harder and harder to spot when someone isn’t who they say they are. The impact of fraud can be devastating, from unaffordable personal losses to causing the total collapse of companies.
It’s important to stay vigilant and never share your personal details or money with anyone unless you’re absolutely certain they are who they say they are.
These warning signs can help you to spot fraud early and prevent or minimise the damage:
- Unsolicited calls, texts or emails: If you receive a call from someone claiming to be from your bank, it’s best to put down the phone and contact the bank directly on their official phone number. Remember that your bank will never ask you to share private details such as passwords or account numbers over the phone or via email.
- Being asked to send money: If you receive a text, email, or social media message asking you to send money, you should always check if the request is legitimate before acting on it. If the request seems odd or unexpected, be sure to check the email address, phone number, or username of the person sending the request, even if you recognise the contact name on your device. This will reveal whether the message was legitimately sent from someone you know, or whether a fake account or number was used to impersonate them.
- Being asked to pay in an unusual way: If the way you’re asked to make a payment seems strange to you (e.g., using iTunes vouchers or paying through a Western Union international money transfer), there’s a strong likelihood that someone is trying to scam you. Your bank or any other service provider you use will never ask you to make payments like this.
- Poor spelling: Fraudulent emails and messages are often riddled with spelling or grammar mistakes. Say the message is supposedly from someone you know, you might notice that the style of writing is unusual or seems out of character for the sender.
- Unusual or unexpected transactions: If you notice any purchases on your bank statement that you didn’t make or don’t know about, you should report this to your bank immediately. Check your bank statements regularly to ensure nothing is amiss.
- The ATM eating your card: Fraudsters have been known to tamper with ATMs in order to steal your card and get your PIN number. If the ATM eats your card, you should report it to your card company straight away, ideally using your mobile phone while you’re still in front of the machine.
- Calls about debt: If you start receiving unexpected calls from debt collectors or companies about things you didn’t buy, chances are it’s someone trying to scam you. It’s best to hang up the phone in these situations and not give them any of your personal information.
- Using fear tactics: Look out for messaging that exploits fear or uses pressure tactics, such as messages that claim you’re going to lose all your data or money unless you do as the message instructs. These claims are usually completely fabricated and can be ignored, but contact someone you trust if you are worried.
- Websites without a padlock symbol: The [little padlock that appears next to a website’s URL](https://ec.europa.eu/research-and-innovation/en/horizon-magazine/story-behind-little-padlock-your-browser#:~:text=Whenever you see a little,that keeps us safe online.) indicates that any information you enter (such as passwords or credit card numbers) is private. If there isn’t a padlock next to the website’s URL, this means that the site isn’t secure and your activity and payments could be intercepted.
What should I do if I see fraudulent activity on my bank account?
If money has been taken from your bank account or you think your personal details have been stolen, the first step is to contact your bank immediately. They will cancel any cards that are linked to your account and put a freeze on your account so that no more money can go out.
In most cases, the bank will refund the money that has been stolen, unless they find you were careless with your card or bank details. This is why it’s important to stay vigilant about the techniques that criminals might use to get you to give away your information willingly.
If a scammer has hacked into your account, you should change your password immediately and let your bank know that your financial information may have been stolen.
You can report financial fraud to the police through the Action Fraud website or on 0300 123 2040.
What’s the difference between a direct debit, standing order, and recurring payment?
Direct debits, standing orders, and recurring payments are all regular payment methods that can be set up to debit money from your account. Although fundamentally similar, there are some key differences between them that you should know before opening your new current account.
A direct debit is set up when you give a company permission to take money from your bank account. You have very little control over how much money is taken – however, the company you’re paying will usually send you a bill in advance to let you know how much will be taken and when. You’ll also be entitled to a refund if there are any errors in the payment thanks to the direct debit guarantee.
This payment method is most often used to pay regular bills that might fluctuate from month to month – such as your electricity and water bills – so that you don’t have to remember to pay the amount manually each time it is due. Direct debit is the preferred method of payment for most companies because it guarantees that they will be paid on time each month and don’t have to worry about chasing up delayed or missed payments.
To cancel a direct debit, you will usually have to contact the company or organisation debiting the money from your account directly and ask them to cancel the arrangement. You can also ask your bank to cancel a direct debit on your behalf.
A standing order is an instruction from you, to your bank, to pay a fixed amount of money to an account. Standing orders can be sent to any account or organisation that you regularly make payments to, but this payment method gives you full control over how much and how frequent payments should be.
Some people choose to set up standing orders rather than direct debits to pay their bills because it means they are in control of their own money and can ensure they only pay the amount that they were expecting to. Although this payment method might be preferable if you want greater financial control, it can also be more work for you, as you’ll have to remember to set up your new standing orders correctly and adjust or cancel them when necessary.
Standing orders are easier to cancel than direct debits because you can cancel them yourself from your online banking account or by using your mobile banking app at just the click of a button.
A recurring payment is where you give a company your card details and they set up a regular or continuous payment from your card. You’ll know if you’re setting up a recurring payment rather than a direct debit if you give the company your 16-digit card number, rather than your bank account number and sort code.
This method of payment is usually used when paying for a subscription, such as a TV streaming service or recipe box. You have very little control over how much or when your money will be taken with these payments, and the company usually won’t let you know in advance that they’ll be taking a payment. However, you should be able to check your monthly payment amount via your subscription service account. You can also check your bank statements to see how much money has gone out.
Current account FAQs
What documents do I need to open a bank account?
To open a bank account, you’ll typically need to provide proof of identity, such as a passport or driving licence, and proof of address, such as a recent utility bill or bank statement. You may also need to provide employment details or income information, depending on the type of account you’re opening. If you’re switching from one bank to another, you might need to pass on those details, too.
What are interest rates like on a current account?
Current accounts typically have two types of interest. One is added to your balance when you’re in credit and the other is applied to your overdraft.
High-interest current accounts allow you to earn a higher interest rate than standard current accounts, but in a lot of cases, you’ll have to pay a monthly fee and will be subject to very high overdraft charges.
To get the most out of your current account, you want:
- The interest on your balance to be as high as possible
- The interest on any overdraft to be as low as possible
Make sure you shop around and compare your options to ensure you get the best deal.
Do I need a separate savings account?
It’s not mandatory to have a separate savings account, but it’s a good idea if you’re looking to save money and earn interest on your savings. Many banks offer savings accounts that have higher interest rates than current accounts, making them an excellent option for building your savings. It’s also possible to open savings accounts with your current bank in a quick and simple application – this keeps all of your accounts accessible from one online banking platform.
Do I need identification to set up a bank account?
Yes, you’ll need to provide proof of identity when opening a bank account. This is a legal requirement designed to help prevent fraud and other financial crimes. The bank needs to verify that you are who you claim to be before they can allow you to open an account and use their services.
Can I set up a bank account on behalf of somebody else?
No, you cannot open a bank account on behalf of someone else, unless that person is a child under your legal guardianship. However, if you have a legal right to act on behalf of someone else or hold a power of attorney, it may be possible to open a bank account for another person, this just requires a different process.
Do I need to pay a certain amount into my current account?
A lot of current accounts require you to pay a minimum amount into your account each month, which is usually between £500 and £1500. Because of this, people often choose to have their salary or pension paid into the account.
Of course, the minimum amount will vary between different current accounts, and some current accounts might not ask for a minimum monthly deposit at all.
It’s a good idea to shop around if you’d prefer an account that offers more flexibility.
Can I add another person to my current account?
Yes, provided they are over the age of 18, it is possible to add another person to your current account and turn it into a joint account.
Depending on your bank or building society, you’ll usually be able to do this online or by visiting a branch. Both you and the person being added will need to provide some ID and proof of address.
Be aware when turning your current account into a joint account that if the other person has a bad credit score, it’s likely to bring down your credit rating as well.
What are jam jar accounts?
Jam jar accounts let you separate your money out into different ‘containers’ within the same account. This allows you to split your money between things like bills and household expenses, everyday spending, and leisure and entertainment. Some credit unions offer this type of account but charge monthly fees, which means they’re not always good value.
An alternative to jam jar accounts could be to open separate fee-free current accounts and split your money between these. There are also a number of app-based banks, such as Monzo, that let you split your money into different spending pots and better manage your budgets.
What do I do if I’ve sent money to the wrong account?
Most banks now use the Confirmation of Payee scheme when you send money to a different account to check that the name of the account you are sending money to matches the sort code and account number that you enter. If the details don’t match up, the bank will let you know so you can amend any errors before making the payment.
However, some banks aren’t yet signed up to this system, which means if you accidentally type in an incorrect digit when entering the sort code and account number, your cash could end up in a stranger’s bank account.
If you do end up sending money to the wrong account, here’s what you need to do and what will happen next:
- Contact your bank straight away to let them know about the error. Banks can’t stop payments that have already been made, but they can get the situation sorted out more quickly if you make them aware as soon as possible. To speed up the process, it’s a good idea to keep a record of all correspondence you have with the bank and also to make a note of exactly when the mistake was made. If you know the error you made (such as entering the wrong sort code), you should make a note of that as well.
- Your bank will act within two working days of you reporting the mistake. It will act quickly even if you discover your mistake a week or even a year later, but it’s always wise to check that your payments have reached the right recipient straight away.
- If there are no disputes, your money will be returned to your account within 20 working days. When there’s clear evidence of a genuine mistake, your bank will contact the receiving bank on your behalf to request that the money isn’t mistakenly spent by the person who wrongly received it, and you’ll get your money back.