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Your current account is probably the one financial product you’ll use most days, whether that’s swiping your debit card, paying a bill by direct debit or carrying out bank transfers. It’s likely you’ll also receive your income into this account, whether that’s from your job, pension or rental income.
There are around 75.6 million current accounts held by customers in the UK, according to market intelligence firm Mintel. However, the overarching label of “current account” hides the huge variety of options available.
While there are standard accounts, you can get more elaborate options such as cashback perks, packaged accounts that come with added insurance extras, as well as specialist accounts for certain customers, such as students.
Here, Telegraph Money takes you through the different types of accounts on offer and what could work best for you. In this guide we will cover:
Most high street banks offer current accounts to anyone over the age of 16 – some may have a minimum age of 18 if they offer features like an overdraft.
Standard current accounts are usually free to open. Ways to open the account will depend on the provider – more traditional banks usually let you open an account in person at a branch, via post, phone or online. There are also digital challenger banks such as Monzo or Starling that will let you open an account quickly via an app.
Regardless of how you open the account, the provider will need to see proof of identity – usually using a driving licence or passport – and proof of address, via recent council tax or utility bill. You’ll either have to take these documents into a branch, post a photocopied version of them or, in some cases, you can take a picture on your phone.
For current accounts that come with an overdraft, you’ll need to have a credit check. Depending on your credit score, your maximum overdraft limit may be revised.
Basic current account
There are around 7.3 million basic bank accounts open in the UK, according to government data. Since 2015, the UK’s nine biggest personal current account providers have been required to offer a basic account to customers who were not previously “banked” (that is, did not have any bank account) or did not qualify for the provider’s standard current account.
A basic account operates in the same way as a standard current account, allowing for deposits, withdrawals, debit card payments and standing orders. However, there are no other bells and whistles; it will not even offer an overdraft or a cheque book. There may also be limits on how much you can withdraw each day.
Standard current account
A standard current account allows you to make and receive payments. If it doesn’t come with any extra features, other than perhaps an overdraft, and as such it is usually fee-free.
If an overdraft isn’t provided as standard, there may be the option for you to apply for one, or extend their existing limit (subject to a credit check).
It is important to understand the costs associated with any overdraft, as providers often charge high interest rates – around 40pc interest is common – for borrowing in this way.
Banks may also offer packaged accounts for those looking for add-ons. Packaged accounts are the same as standard current options, but provide additional services such as insurance or commission-free currency exchange, for a monthly fee.
If you are tempted by a packaged account it is worth considering what add-ons you are looking for, and then checking whether you could get the service cheaper elsewhere.
High-interest current account
High interest current accounts are, as the name suggests, accounts that offer interest on your balance. If you tend to transfer money out of your account each month, this might not be of much help – but if you tend to keep cash readily available then it’s an easy way to boost it.
Some current accounts pay up to 5pc, but often come with several caveats – such as requiring a certain number of direct debits, and paying a certain sum into the account each month.
Nationwide, for example, offers 5pc interest on deposits of up to £1,500 and an interest free overdraft for 12 months on its FlexDirect account. After that the rate drops to 1pc.
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