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Types of current accounts

Ella Jukwey
Written by  Ella Jukwey
Jonathan Leggett
Reviewed by  Jonathan Leggett
5 min read
Updated: 15 Mar 2024

Are you unsure about which current account is best for you? Our guide explains the ins and outs of the different types of current accounts.

A current account is essential for your everyday banking needs. When it comes to your daily spending, you’ll normally use your debit card which is linked to your current account. Think of your current account as a bank account that holds the money you currently have. When you use your current account, you’re not borrowing money from a provider the way you do with your credit card. Your current account is also where your salary is paid into.  

What to consider before opening a current account? 

Current accounts are a must for your daily banking, so it’s a good idea to think about what’s important to you before signing up for a new bank account. 

Overdraft: 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. 

Spending abroad: 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. 

Rewards: 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. 

Cash incentive: 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. 

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

current accounts

What are the different types of current accounts?   

There is a range of current accounts available which cater to different needs and spending habits.  

Joint bank accounts 

  • What is it? A joint bank account is an account shared between two or more people. 

  • How do they work? A joint bank account works like a standard current account, with the main difference being that there is more than one account holder with access. 

  • Main advantage:  A joint account can make it easier to divide finances, for example you can use a joint bank account to split household bills between you and your partner. 

  • Potential disadvantage:  It’s important to only open a joint account with someone you trust.  For example, if the account co-owner overspends and puts your account in overdraft, you’re equally responsible for paying off any debt. 

  • Who is it best suited for? These accounts are best suited to people who trust each other as they’ll both be responsible for any fees and debt on the account. 

High interest bank accounts  

  • What is it? A high-interest bank account generates an above-average interest rate on your account balance. 

  • How do they work? This type of account pays you interest on your balance. You’ll usually need to have a certain amount of money in your account to benefit from interest. 

  • Main advantage: These accounts allow you to earn interest on your balance and can be a savvy way to make the most of the money in your bank account. 

  • Potential disadvantage:  High-interest accounts may charge a monthly fee as well as having high overdraft charges. 

  • Who is it best suited for? If you don’t regularly go into your overdraft and are able to keep your account within credit, then a high-interest current account could be right for you. 

Reward current accounts  

  • What is it? A type of current account that rewards you for your spending. 

  • How do they work? A reward current account may offer benefits such as cashback when you make purchases with selected retailers. 

  • Main advantage: Earning cashback can provide a boost to your bank balance. 

  • Potential disadvantage: You might have to pay a monthly or annual fee. 

  • Who is it best suited for? A rewards current account is ideal for people with strong credit scores, as it’ll be easier to be accepted if you have a strong credit rating. This type of account could also be beneficial for you, if you shop regularly at the retailers where you can earn cashback from.  

Basic bank accounts  

  • What is it? A no-frills bank account for people who don’t qualify for standard current accounts. 

  • How do they work? This is a stripped-back bank account which can be used for salary payments, ATM cash withdrawals and direct debits. However, they don’t come with overdrafts. 

  • Main advantage: Because basic bank accounts don’t offer overdrafts, this can help prevent overspending and any associated fees. 

  • Potential disadvantage: The absence of overdraft means you can’t borrow in the short-term. 

  • Who is it best suited for? These accounts are designed for people with bad credit scores and who have had financial difficulties in the past. Basic bank accounts come with borrowing limits which can be handy if you’ve had previous problems with overspending. 

Student bank accounts  

  • What is it? A current account specifically tailored to students

  • How do they work? They work similarly to a standard current account, however key differences include interest-free overdrafts, discounted railcards and cashback. 

  • Main advantage: If your account ends up in the red, with an interest-free overdraft you won’t be penalised for it. 

  • Potential disadvantage: Your account terms are likely to change once you’ve graduated, so you might now face overdraft fees and lose any perks such as cashback. 

  • Who is it best suited for? If you are UK-based student and have a good credit rating it is more likely you’ll be accepted for a student bank account, as international students may not be eligible. 

Children’s bank accounts  

  • What is it? An account for those aged under 18

  • How do they work? Depending on the type of children’s current account, some accounts will have more parental control than others.  These accounts usually don’t come with an overdraft. You may also be able to set spending limits for your child. 

  • Main advantage: The restrictions that come with this account, such as not having an overdraft can prevent children from entering the red. 

  • Potential disadvantage: The downside of this type of current account is that your child might not be mature enough to handle it responsibly. 

  • Who is it best suited for? If you’re a parent who wants to teach your child about money management, then a children’s current account can help them learn how to control their finances. 

What other types of current accounts are there? 

Accounts with overdrafts 

Standard current accounts will usually offer an overdraft. You enter an overdraft when you spend more money than you have in your account. There are two types of overdrafts: arranged and unarranged. An arranged overdraft is when you’ve agreed an overdraft limit with your bank, this is how much you can owe without being charged. An unarranged overdraft can happen when you’ve spent more than your arranged overdraft limit. You’ll also enter an unarranged overdraft when you haven’t agreed an overdraft with your bank and have spent more money than what’s in your account. 

Bank switching: 

It’s straightforward to switch bank accounts in the UK by using the Current Account Switch Service (CASS), which covers 99% of UK current accounts. Find out with CASS if you’re able to switch and if you’re eligible, you’ll be able to start your switch. Depending on the new current account you’ve signed up for, you could even benefit from a cash switch incentive, which is an amount of money given to you by your new current account provider. 

Other useful guides 

If you’re looking to get clued up on current accounts, we have a range of articles you can read: 

Choosing the best current account   

What is a student bank account   

Switching bank accounts   

Compare current accounts with MoneySuperMarket 

If you’re looking for a new current account, it’s quick and easy with MoneySuperMarket. We let you sort current accounts by key features such as switch incentive amount and customer service rating. You can also see if the current account comes with an overdraft and any additional fees, so you can make an informed decision about your next current account. 

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