Guide to Current Accounts

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The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

8 questions to ask before opening a current account

Even as our world gets more digital, banks play a key role in our ability to manage our money. Whether you’re completely new to banking, moving to a new town, or simply not satisfied with your current bank, these eight questions will help you make the right choices about your money.

1. Is there a monthly fee, and if so, how can I avoid it?

Many banks charge monthly fees for their basic current accounts and/or savings accounts. Those fees are often easily avoided, however, by qualifying for one of the bank’s exceptions. Setting up a monthly direct deposit to the account or maintaining a certain level of funds in the account are common ways to avoid these fees.

2. Which ATMs can I use for free?

Most banks allow you to use their own ATMs at no cost, but your bank may not always be the most convenient way to access cash when you need it. Using an out-of-network ATM could cost you fees from your bank as well as from the ATM owner and/or network.

Some banks, however, belong to networks that allow you to access all ATMs within the network for free. If you have a need to access cash from a variety of locations, having an account with this feature can save you pile of money over time

3. Is there a cost to pay bills online?

For many of us, paying online is quick and easy, saving precious time. So finding a bank that doesn’t charge fees for this option is ideal.Many banks offer absolutely free online bill-payment services, but a few have fees attached.

Even for those banks that don’t charge fees, keep an eye out for important provisions like the speed of processing. For example, some banks do charge fees for online payments if you want expedited processing, so be sure to set up your bill-payment schedule to allow enough time between paychecks and due dates to avoid those costs.

4. Can I make mobile deposits for free?

Your bank likely has a mobile app that lets you deposit checks from your phone. Most banks offer that service for free, but some may charge for the convenience. Still others offer mobile deposits for free but put a hold on the money for several days, though the bank might then offer you access to a given deposit faster for a fee.

5. What interest rate will I earn?

Most banks offer some interest on their savings accounts, though the current average is very low. On current accounts, if interest is available, rates are frequently even lower than savings accounts, and you need a larger balance to qualify for the best rates. Nevertheless, it’s worth finding out if earning interest is an option on the current account that you’re considering.

6. What happens if I spend more than I have in the account?

If you overdraw your account, your bank may deny the withdrawal and charge you fees. Many banks will allow you to link your checking and savings accounts so that there’s an automatic transfer if one account is overdrawn, though those automated transfers may come with a fee, too.

If your bank also allows you to link a credit card to your account to avoid overdraft fees, be cautious. In addition to whatever “activation” fee the bank charges for using the overdraft service, the draw from your credit card may be considered a cash advance on that credit card. That will subject you to your credit card’s cash-advance charges and interest rates, which are typically higher than you pay when using it to make purchases.

7. How can I get help if something goes wrong?

Your bank may have nearby branches that you can walk into to ask for help. If you have an internet-only bank or use a bank from out of town, you’ll be reliant on phone, webchat, or email to resolve any problems that may arise.

It can be scary — and expensive — to see unauthorized withdrawals from your account, or to see a deposit not clear your bank in time to cover scheduled withdrawals. Knowing in advance how your bank will work with you in the event problems arise can help you come to a resolution that much more quickly, making you more confident in your choice of banks.

8. What’s in it for me?

In addition to interest on your accounts, some banks offer rewards programs for things like using your debit card to make purchases, or having a credit card as well as deposit accounts with the bank.

When you open and fund a deposit account, it’s your money in the bank. The better that the overall package the bank offers can meet your needs, the happier you will be entrusting your hard-earned cash to that institution.

What is a savings account?

It’s not particularly secure to save large amounts of cash on your person, or in your home. It’s much better to keep those bills locked away at a bank. Your local lender is happy to oblige by offering you a savings account.

The savings account is often the first type of account parents open for their children. This, ideally, teaches them how saving works, and the basic functions of a bank.

Current account basics

A current account is the most basic type of bank account. It’s designed to be the go-to account for spending, the source of funding for both regular and occasional purchases.

Current-account holders have numerous ways to draw from their account in order to make purchases and settle bills. Here are several major ones most of us have used at one point or another:

  • Debit card — Even in the more remote parts of the country there’s usually an ATM lurking somewhere nearby. This ubiquity and convenience is ideal for the current account, which is why most come with linked debit cards. The debit card can be used not only to draw cash at the ATM withdrawals, it can be utilized for purchases in person or online.
  • Direct debit or standing order — For recurring monthly bills, direct debits and standing orders are a convenient way to pay and a time saver. Most banks offer fee-free direct debits and standing orders, so if yours doesn’t, it could be worth your time to shop around.
  • Cheques — These rectangles of paper might not last forever, as they’re declining in popularity with the rise of payment cards and e-payment solutions. Still, they remain a go-to means of payment for many, particularly when taking care of major cost items such as rent, or car loan installments.

Online banking bill pay — These days, it’s rare to find a bank that doesn’t include online banking access, via website and mobile app, to account holders. One of the more useful of these services is online bill pay, in which recurring bills can be paid directly from the account. This is relatively easy to set up, and when implemented, provides a frictionless way to automatically take care of regular expenses.