There are so many current accounts to choose from that it can be difficult to work out which is the best one for you. The first step to finding the best UK current account for you is to think about what you’ll be using it for – this will help you compare accounts with a specific purpose in mind.
What are you using the account for?
Most of us have our wages or salary and/or benefits paid straight into our current account, which we also use to pay bills and rent/mortgage payments. Some of us also rely on our account’s overdraft to help carry us over until payday.
This makes it important to consider all the different possible features your current account can have, to make sure you get the most from it. A number of features will be available for free – such as banking apps – but some additional features come with a cost, and are called packaged bank accounts.
Accessing your current account
When choosing a current account, keep in mind the way you prefer to access your bank:
- Online/app – banking over the internet or via an app can be useful if you’ll need to access your account 24/7.
- Phone – banking by phone can also be useful if you aren’t near your local branch.
- In-branch – the traditional way of banking, where you drop into your high street branch and speak face-to-face with a clerk.
Some banks offer switching incentives, which give you a cash bonus or a free gift when you switch your current account to them. But you’ll need to meet certain criteria, such as paying in a minimum amount each month and running a number of direct debits from the account, in order to qualify for the bonus.
Possible incentives for opening a current account include:
- Cash incentives – you get a cash bonus for signing up.
- High interest rates – you earn interest on your balance, up to a certain balance amount
- Interest free overdraft/buffer – you aren’t charged for being overdrawn, sometimes only up to a certain amount.
- Insurance/breakdown cover – you also benefit from included coverage for services such as insurance and emergency assistance.
- Better rates on foreign currency, loans, savings accounts, mortgages – you’re given more favourable rates as a reward for being with the bank.
Potential current account charges
Some current accounts may come with a fee. At times, this charge can be waived if you meet certain criteria – for example some accounts will waive the fee if you pay more than £1,000 in each month. Other current accounts are completely free-of-charge, so keep this in mind when comparing your options.
In addition to a possible monthly fee, keep an eye out for any potential charges your bank may apply, including:
- Duplicate statements – if a past statement has to be resent
- Banker’s drafts – like a cheque, but prepaid and issued by the bank
- Banker’s reference/enquiry – a report issued by the bank to determine your financial risk i.e. for a mortgage or tenancy
- Access abroad – when you access your bank account from overseas i.e. withdrawing money with your debit card on holiday
- Unarranged overdraft – going overdrawn without arranging it with your bank beforehand
Current account interest rates
Another thing to keep in mind is the interest rate your bank may apply to your current account. This is generally given as your annual equivalent rate, or AER.
Interest rates on traditional current accounts are normally lower than those you’d find on a savings account, and some current accounts do not pay any interest. That said, it’s possible to find current accounts with a higher rate than normal, and some can even outstrip savings accounts.
These often require you to make a minimum monthly deposit and you’ll have to set up (or transfer, if you’re switching) two active direct debits.
Types of current account
Current accounts are normally accounts for everyday use, but you can get special features on a current account depending on your needs and wants, the bank you choose to open an account with, or the type of account you apply for.
The different types of current accounts you can find include:
A standard current account is generally what most people go for. It should come with a debit card, a cheque book, and an overdraft
Basic bank accounts could be described as ‘no frills’, often coming without an overdraft or cheque book. These are aimed more towards people with no, or poor, credit histories.
Packaged current accounts are current accounts with extra bonuses, such as interest-free overdrafts, various insurance add-ons, and discounted interest rates on loans and savings. However they can also come attached with monthly or yearly fees, and you may not be eligible for some of the benefits, so it can pay to check beforehand what would be best suited to your situation.
Student current accounts are designed to help with the financial difficulties students often face, therefore they often come with interest-free overdrafts and potentially other perks like help with travel costs.
Graduate current accounts generally follow on from student accounts and help recent graduates transition to the working environment. You may still have an interest-free overdraft but this is normally reduced over time.
A joint current account is an account for two or more people, generally used by couples or households with a shared fund for expenditures like rent and bills.
Children’s accounts are aimed at youngsters, normally with stripped back features. Some may come with debit or cash cards to control outgoings, and they don’t have overdrafts.
Religious current accounts, such as Islamic bank accounts, are accounts that have to comply with religious ruling, therefore they can often work in different ways to standard accounts. For example, Sharia law states that you cannot make a profit on money exchanges, therefore earning and paying interest is forbidden. Sharia-compliant accounts often provide a profit-sharing alternative to interest payments.
Accounts that haven’t seen any activity in around 15 years are known as dormant bank accounts. This means the account can’t be accessed anymore or the owner of the account can’t be contacted, and the money is generally given to charitable causes. It is possible to reclaim lost funds, but it can take some time.
Finding the best UK current account
Finding the best current account is important when arranging your finances, so it helps to be able to compare different providers. On MoneySuperMarket, you can compare current accounts by their interest rates, overdraft rates, rewards, as well as the different facilities included and customer feedback. You’ll just have to provide some information, such as your full name, date of birth, and home address, then you’ll be able to pick from the accounts best suited to you.
Once you’ve decided on which one you want, it’s easy to switch current accounts. Thanks to the Current Account Switch Service the process now takes a guaranteed 7 working days to switch (not including weekends or bank holidays), so you can be up and running as soon as possible.