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What’s the difference between a current account and savings account?

A current account is best for everyday banking – like getting money out from the hole in the wall or paying bills. On the other hand, a savings account is best for… well… savings.

As banks vie for our business, the lines between the two types of account are sometimes blurred, so it’s not always immediately obvious which one is the one you need.

To help you weigh up the pros and cons, here’s a whistle-stop tour of current and savings accounts.

Main features of a current account

Current accounts are ‘transactional’. In other words, they’re designed to be used on a regular basis – money goes in, money goes out. Banks and building societies offer all sorts of current accounts, so while they’re fundamentally the same, each one will have its own nuances.

Generally, you can expect a current account to give you:

  • A debit card – which lets you pay for lovely new stuff without using cash. The amount is then deducted directly from your current account.
  • The ability to set up payments – for example, standing orders and direct debits.
  • An overdraft facility – which lets you spend more money than you actually have (up to an agreed limit, naturally).
  • A cheque book – yes, you read that right; cheque books still exist and, believe it or not, they still come in handy.
  • The option to bank on the go – almost all current accounts come with online access, which means you can organise and send payments even when you’re out and about. 
  • Low or no interest – current accounts rarely come with interest rates worth talking about, if they do at all. For those that do pay interest, there are often conditions you need to meet, such as paying a certain amount of money into your account every month.

Main features of a savings account

When it comes to savings accounts, the clue is in the name – it’s an account that you put money in with the intention of leaving it there.

But, to make it more complicated, a ‘savings account’ isn’t just one type of account. The name is more of an umbrella term that covers a range of different products; for an in-depth look at what these are, see our guide to savings accounts.

However, savings accounts do share similar features, including:

  • No overdraft facility – you can’t spend any more than you have and, in most cases, you’ll need to be in credit to keep the account open.
  • Interest – you’ll be paid interest on the money you have sitting in your account. While you’re unlikely to earn enough interest to retire on it, the interest rate will often be more than that offered on a current account.
  • No debit card or cheque book – you won’t typically get these with a savings account. If you need cash, you’ll need to withdraw it or transfer it to a current account.
  • Limited number of withdrawals – first and foremost, savings accounts are about accruing money, so many of them will limit how much you can take out and how often.

Which type of account do I need?

Current and savings accounts are inherently different beasts, although some savings accounts superficially mimic current accounts and offer debit cards as well as unlimited withdrawals.

With that in mind, there’s nothing stopping you from using a savings account as a current account, but bear in mind that convenience usually comes with a catch. And the more accessible a savings account is, the less you’ll earn in interest.

So how do I choose?

Ultimately your decision comes down to how you use your money and whether you have savings – that is, to your expectations about the amount of interest that’s paid.

In reality, many people have both types of account, to fulfil two different functions:

  • A current account that wages are paid into and bills get paid from; and
  • A savings account that stores any ‘spare’ money.

If you use online banking, then you should stay on top of any admin for managing both accounts.

Plus, in most cases, if you hold a current and a savings account with the same bank, you’ll be able to link them. Linking accounts not only makes budgeting much easier, it means access to all your money will be at your fingertips. (Just don’t spend it all at once.)

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