Everything you need to know about current accounts
A current account is a type of bank account where you can receive your wages and pay bills.Our guide explains how they work and how to pick one.
Key takeaways
Current accounts are crucial for managing your household bills and expenses
Some current accounts pay cash perks for new customers
Most current accounts don’t pay interest on the balance kept in them
A current account overdraft provides added flexibility and quick access to emergency funds
A current account is one of the most important financial products to have. It’s the place where you can receive money and also pay for things.
But what exactly is a current account? And how does it differ from other types of bank accounts? This guide will explain everything you need to know about current accounts.
What is a current account?
A current account is a bank account for everyday use. It’s the place where your money is kept, from your wages, benefits, or any other income you have, and it allows you to pay for things.
Most current accounts come with debit cards, used for withdrawing cash or for paying for things online.
It's important to remember that the money in your current account is the money you currently have – it's not borrowed money, unlike what you'd find with a credit card.
Who can open a current account?
In the UK, banks typically require individuals to be at least 18 years old to open a current account, though some may accept those aged 16 and over.
There may be other requitements too, such as earning a specific amount each month or paying a monthly fee for the account.
What do I need to open an account?
You will be required to show specific documents when you open a bank account, these can include:
Your driving licence
UK passport
A household bill with your current address on
Details of your salary (such as your last pay slip)
What’s the difference between a current account and a savings account?
Current accounts and savings accounts are two very different things:
A current account is your go-to for daily spending, whether that’s household bills, a supermarket shop, or paying off your credit card.
A savings account is somewhere to store your money for a rainy day. It will pay interest in return for you keeping your money there.
Benefits of having a current account
On top of using a current account for your spending, there are other benefits including:
Cash accessibility: Withdraw money at ATMs or bank branches instantly
Financial safety net: Up to £85,000 of your money is protected under the Financial Services Compensation Scheme (FSCS) if your bank or building society fails.
Automated payments: Easy setup of direct debits and standing orders for regular payments, ensuring you never miss a bill.
Types of Current Accounts
There are a range of current accounts available. Here are some of the most common types:
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.
Types of current accounts
Joint bank accounts
High interest current accounts
Reward and cashback current accounts
Basic bank accounts
Student bank accounts
Children’s bank accounts
Will I get an overdraft with a current account?
You may not automatically be given an overdraft. A current account's overdraft allows you to spend more money than you have in your account. You will usually be charged interest when you’re using your overdraft.
There are two types: authorised, which is pre-agreed with the bank, and unauthorised, which can incur significant fees. It's crucial to understand the terms and costs associated with overdrafts to avoid any unwelcome surprises.
When you apply for an overdraft, the bank will run a credit check to assess if you can afford to repay the debt. Our free Credit Score can help to give you a clearer picture of your credit score before you apply.
Other useful guides
For those hungry for more knowledge, there are several guides available to deepen your understanding of current accounts:
Navigate the process of Switching bank accounts with ease.
Learn the ins and outs of Basic bank accounts and see if they're right for you.
Protect yourself from financial crime with our Bank fraud explained guide.
The pros and cons of having Multiple bank accounts
Compare current accounts with MoneySuperMarket
Choosing the right current account can be a daunting task, but MoneySuperMarket is here to help. Our platform assists in comparing current accounts from leading providers, highlighting cash incentives for switching.
Filters help find specific types of accounts, like high interest or children’s accounts. Direct links to providers are available to complete applications. Let MoneySuperMarket be your ally in finding the perfect current account for your financial needs.
