What kind of Bank account works for you
Written by: Maria Brett
Opening a bank account sounds straightforward enough. You go in, deposit some cash, tell them about your direct debits and standing orders and off you go. However, it’s not quite that simple. You need to think about how you’re going to use the account and what type of account works best for you. With a number of banks all competing for your custom and offering different kinds of account how do you know which Bank account works for you?
Current accounts
This tends to be the account that your everyday finances are controlled through. You can set up direct debits and standing orders to come off a current account as well as receiving regular payments such as your salary or Child Benefit. It is relatively easy to set up an overdraft on a current account and you’ll have a debit card to withdraw cash. You may need to commit to paying in a regular sum each month. Current accounts are normally free but expect to pay charges if you go overdrawn.
Packaged accounts
Packaged accounts are similar to current accounts in that they allow customers to take care of their day-to-day finances. Where they differ is that the customer is charged a monthly fee (generally between £5-£15) in return for extra benefits. These extra features usually include things like travel insurance, breakdown cover and commission-free foreign currency. Before signing up to a packaged account, consider how many of the extra features you would use and work out whether it would be cheaper to buy them separately.
Basic accounts
If you are on a low income, have a poor credit history or have been refused a current account you may still be able to open a basic bank account. Basic accounts are often used as a stepping-stone towards a current account. You will be able to have wages and benefits paid straight into the account. Direct debits and standing orders can also be set up to pay bills and you’ll be given a card to take money out over the counter or at a cash point. Not all basic accounts offer a debit card but some do. Unlike many current accounts, there is usually no minimum amount that has to be paid in to a basic account each month. As basic accounts don’t offer overdrafts, you won’t need to undergo a credit check.
Jam jar accounts
Jam jar accounts are a great way to get help with budgeting. Once you’ve worked out your budget for the month you can divide your cash by choosing how much money to put in different ‘jars’. For example, you could have one for bills, one for food shopping, another for saving and yet another for everyday living costs. You can have your salary and benefits paid into the account and set up direct debits and standing orders. The downside to these accounts is that they often incur a monthly fee.
Student accounts
Student accounts usually offer all the same features as current accounts. However, they usually offer more generous overdraft limits with no interest charged. Many banks also throw in other extras, such as railcards, to entice new customers so it is worth shopping around. When you finish your studies the bank will move you onto a graduate account and your overdraft limit will be slightly reduced year by year until you are ready for a regular current account.
When opening a bank account it is sensible to shop around and compare options to make sure you’re getting the best deal available. Telephone and internet banking is great but you’ll also need to make sure there is a free-to-use cash point close to you to withdraw money and if you prefer to do banking in person check that there is a branch in your area.
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