When it comes to choosing a bank account, it’s worth remembering that not all banks and bank accounts are the same. Here are a few things to consider if you are looking to open a bank account, to ensure you get one which suits your circumstances and needs.
Current account vs Savings account
Current Account
If you need an account for your salary to be paid into, to pay bills from and to use for everyday spending, then a current account will be your best choice. These usually come with a debit card to make payments with and withdraw cash and generally come with internet/smartphone access so that you can manage your money more effectively.
The ease of access (to both your account and your money) generally comes at a cost though as current accounts generally don’t pay you interest on the money you hold in them and may charge you a monthly fee.
Some banks provide benefits in return for the fee they charge, including ‘free’ travel and mobile phone insurance. However, you should consider if you will use them, need them, already have them, or could get them cheaper elsewhere, before being lured by them as justification for the cost of having a current account with a certain bank. It is possible to find bank accounts which don’t charge fees, but these will generally provide less banking functionality.
As with many things, it is well worth looking at several banks before deciding who to open a current account with as what they offer (both in the form of banking services and benefits) and what they charge can vary.
Savings Account
If you simply want an account in which to save money, then a savings account is likely to be a better option. Savings accounts pay interest on the balance you have in them and generally don’t charge account fees. The reason for this difference between a savings account and a current account is that savings accounts are not intended to be used to manage day-to-day finances, so come with less of the functionality that a current account provides.
For instance, whilst you may be able to view your balance and transfer money out of your savings account using internet/smartphone access, you are unlikely to be able to set up Direct Debit payments or receive a Debit Card.
The rate of interest a savings account pays is also usually linked to the length of time you want to save for. For example, banks may offer a higher interest rate on your savings if you do not want to access your money 6, 12, 18, 24 or even 36 months. This doesn’t mean you can’t get to your money if you need it in an emergency, rather you will forfeit the interest your savings would have earned if you do.
Some banks also offer better interest rates on savings accounts for those who save money on a regular basis, on larger balances, or if you are willing to give notice to them (of perhaps one to six month) if you want to withdraw your money. As a result, just like current accounts, it is well worth looking at what savings accounts banks are offering and select one that best matches your savings needs.
2. Where do you want to do your banking?
Before the world of internet banking, people would open a bank account in person at a branch of a bank in their local town. However, we are now able to access our accounts, make payments and move money around at the click of a mouse, or the tap of a screen, so having a local bank branch nearby can seem less important. In fact, there are an increasing number of banks which don’t have physical branches as they are wholly online banks. One of the benefits of this is that the banks generally have lower costs, so can provide bank accounts with lower charges and better interest rates. There are some disadvantages though.
For example, if your job means you receive a lot of cash or cheques, paying into an account can be difficult if there isn’t a local branch you can visit. Also, if you have a problem with your account or need some help or advice, you can’t arrange a meeting with a person at a branch and will need to rely on the bank’s telephone or online helpdesk, which many people can find annoying.
Ultimately, whether you open a bank account at a local bank branch or choose to do it all online will depend on your own personal preferences and circumstances. As a result, it is important to think carefully about how you will use your bank account. whether you need or want a physical bank you can visit, or if you are happy doing your banking in the virtual world.
3. Do you need a special kind of bank account?
As well as there being several types of current and savings accounts, banks also provide bank accounts specifically aimed at certain groups of people.
Students and graduates, for example, can access bank accounts specifically targeted at them which have lots of additional (and often free!) benefits attached. This could include an interest free overdraft, discounted travel, free movie tickets and TV steaming subscriptions, and a whole lot more. The reason banks are keen to attract students and graduates is that they are frequently starting out on their banking lives and, once with a bank, many people never leave. This is hugely attractive to banks so, if you are a student or graduate, shop around to see what account and benefits best suit you as banks are likely to want to have you as a customer.
By contrast, those with a poor financial history or a criminal conviction may be limited in the numbers and types of bank account they can open as they are less attractive customers for banks. As a result, it is likely that bank accounts available will be fee-free basic bank accounts which won’t have an overdraft facility but will allow them to pay bills by Direct Debit or standing order, receive payments such as salary, wages or benefits and possibly have a basic cash or debit card to make payments or withdraw cash. As with all bank accounts, it is well worth looking around at what is available if you fall into this category and select what works best for you. In many instances, after you have had one of these bank accounts for some time and managed your money successfully, the bank may upgrade your account to a standard current account, however this is by no means guaranteed.
4. Do your research and ask for recommendations
Bank accounts come in a variety of forms, and it is well worth researching what bank and account will best suit your circumstances and needs. The internet is, naturally, a major source of information, and comparison websites are an effective way to look how different accounts compare. It is also worth asking friends and family who they bank with too.
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