Types of current accounts

Do you need an overdraft facility for your current account? If so, what charges and time limits would you prefer? Pay attention to whether a current account offers this and if the overdraft’s terms and conditions suit your needs.

Are you a frequent flyer who would benefit from fuss-free spending when you travel? Then looking for a current account comes with travel-related benefits could be a good choice for you.

Some challenger banks, don’t charge you for using your debit card abroad and even offer free cash-withdrawals overseas, depending on your account type.

There are current accounts which offer rewards and cashback when you spend. Keep in mind these accounts tend to come with fees and a minimum balance requirement.

When you switch to a new current account, you could be given some money for moving to a new provider. Cash incentives can be up to £200.

Remember that to be eligible for the cash switch incentive, you’ll usually have to meet certain criteria such as never having an account with the provider before.

If you want to earn interest on your current account, then you can look out for a high-interest current account.

A joint account is a way of sharing a bank account between two or more people – usually yourself and your partner, or others you live with.

Advantages :

• Makes it easy to manage household finances

• May allow you to keep a healthier bank balance and earn more rewards or interest

• If you opt for a packaged account, you only pay one monthly fee

Disadvantages:

• You must trust your joint account holder with your finances

• You’ll be jointly responsible for any overdraft debt – even if you didn’t spend the money

• Your credit history is linked to the other account holder, and could be negatively affected

This account could suit someone who is in a trusted relationship where both account holders are open and responsible with their finances.

A high interest current account pays high interest rates on in-credit balances. It may be for an introductory period only, tiered, and/or up to a capped amount.

Advantages:

• Allows you to earn interest on your balance

• There may be a switching incentive, such as cashback, gift cards or insurance

• May provide a linked savings account with a competitive interest rate

Disadvantages:

• High interest rates can be introductory and end after 12 months

• The amount of interest you can earn may be capped

• These accounts often comes with monthly fees and high overdraft charges

This account is ideal for someone who keeps a healthy bank balance and doesn’t dip into an overdraft – meaning they can maximise any interest earned from the account.

These current accounts may give you rewards and cashback when you to spend. Rewards can differ from loyalty points to insurance. Cashback can also come in different ways, such as being paid on your household bills or when you shop at selected high street retailers.

Advantages:

• Earn cashback or rewards

• Rewards may be linked to your favourite shops

• You can often get a reward simply for switching to the new account

Disadvantages:

• There may be a monthly fee to pay

• You may have to deposit a minimum amount into the account each month to qualify for the rewards

• Overdraft charges could be higher than on a regular current account

This account is perfect for someone who is a savvy shopper and enjoys keeping close tabs on their finances to take advantage of any rewards or incentives when they arise.

A basic bank account is a no-frills account that has all the standard banking options but doesn’t provide an overdraft facility – so you can’t use it to borrow money.

Advantages:

• A way for customers with bad credit or no credit rating to open a bank account

• You can't spend what you don’t have

• Can help prove you have a regular income and improve your credit rating over time, eventually allowing you to upgrade to an account with an overdraft and other benefits

Disadvantages:

• It doesn’t offer an overdraft

• Doesn’t offer as many perks and rewards as some standard current accounts

• Often won’t pay interest on the money you have in the account

A basic bank account may be the only viable option for those with bad credit who cannot get a regular account. Basic bank accounts may also suit those just starting out or who have moved to the UK and haven’t had the chance to build their credit rating.

Student bank accounts work in the same way as standard current accounts but usually they come with extra features, such as larger interest-free overdrafts and perks such as discount railcards and shopping vouchers.

Advantages:

• Often provide interest-free overdrafts to help manage your student finances

• Incentives can be better than regular accounts

• Offer smart banking facilities making it straightforward to handle your finances from anywhere

Disadvantages:

• You may struggle to get a student bank account if you’ve a poor credit rating

• International students might not be eligible for a UK student bank account

• You could lose some perks when you graduate and may be required to gradually reduce your overdraft

• Tailored to students, these accounts are often ideal for those studying in higher education

Children’s bank accounts in the UK generally run from the age of 11 to 17 and differ slightly from regular current accounts with no overdraft facility, optional debit cards and parents having discretion to set withdrawal limits.

Advantages:

• Helps your child learn about finances and handle their money

• Can offer appealing perks such as discounts for driving lessons when they turn 17

• Parental control can be put in place to manage spending

Disadvantages:

• While the children might not always appreciate their parents being able to monitor their finances, there aren’t really any disadvantages with children’s bank accounts.

Perfect for teenagers and a great option to help kids start to understand how to manage their finances.