Current account guide

Current account types

Different people look for different things from their current account. You may want an account with a plethora of features, or alternatively, your main concern may be competitive rates of interest on authorised overdrafts and access to other lending facilities such as personal loans.

Whichever account you choose, you need to review its interest rates and terms and conditions regularly as these are subject to change.

Basic bank accounts

Basic bank accounts have limited facilities but allow you to make deposits and withdraw funds without going overdrawn. They do not offer overdrafts or pay interest on credit balances. They offer direct debit and standing order facilities. Some will provide a debit card but, where it is offered, it may have limited functionality. Their main incentive is their ease of use and the ability to get an account without having to undergo a credit check.

Standard bank accounts

Standard bank accounts, or ‘free in credit’ accounts, are usually free to open or maintain - provided that you stay in the black. Standard bank accounts provide the facilities by which most adults make financial transactions; be it receipt of salary, payment of direct debit bills or use of cash machines for their everyday financial transactions. As such, standard bank accounts are an essential requirement for the majority of the population.

Facilities offered by standard bank accounts include debit cards, cheque books (if required), direct debits, overdrafts and standing orders.

Packaged accounts

Most banks also offer packaged accounts (also known as added value accounts). These charge a monthly fee and come with a range of added benefits such as travel insurance, mobile phone insurance, travel discounts or anti-identity theft packages.

Premier current accounts

These are high-end packaged accounts, offering a higher specification of incentives in return for a higher monthly fee. Banks sell these accounts to customers by providing an ‘all in’ package for busy people, together with a named member of staff (‘your relationship manager’) whom you can contact for financial and tax advice.

Premier current accounts typically require a minimum income of at least £75-100,000.

Offset mortgage accounts

Some offset mortgages combine your mortgage with a current account (although some only link to a savings account). It offsets the amount of credit in your current or savings account with the amount left on your mortgage, thereby reducing your total debt.

Student and graduate accounts

If you are deciding which current account is best for you as you enter or leave university, it is important to know that most banks will offer you an account specially tailored account to your needs. The main difference between these current accounts and other varieties is typically an interest free overdraft, but other benefits such as free gifts are available. Find out more about student and graduate banking by looking at our guide to student accounts.

Some people have more than one bank account: a main salary fed account and an account that is less frequently used. Many accounts require you to pay in at least £1,000 every month and they do this to ensure that it will be your primary current account. Different bank accounts are built for different purposes, so shopping around and choosing the best choice for you is a good idea. The type of account and level of overdraft you may be entitled to depends on your credit history. For more information on your credit history, and to find out how it affects you as a consumer, visit our credit scoring guide.

Switching current accounts

Switching current accounts is much easier than many people realise. Under agreed industry guidelines, there are strict time limits on when information must be exchanged by banks and on when the new account must be up and running by, making the whole process quick and easy.

All of the information from your existing current account, including direct debit details, must be sent over to a new bank (if requested) within three days. The bank will ask your permission to do this. Your new account should be operational within ten working days of your application being approved.

Top tips when switching current accounts

• Given the range of features available, considering what you need (and what you may be entitled to) before looking at products is essential.
• Keep an eye on your account’s rates and terms as they are subject to change.
• Remember that packaged accounts and premier current accounts will charge a monthly fee, so think about whether you need the extra bonuses on offer.
• Shop around for the best account, and don’t be afraid of switching providers if your rates are no longer competitive.

This current account guide gives a basic list of what you should look for when considering current accounts. The best way forward, however, is to start looking around for the provider who offers you the best option. Using Defaqto's compare current accounts tool is a great way of doing this.