The Complete Guide to Current Accounts in the UK

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What Is a Current Account?

A current account is the main type of personal bank account that most people use to manage their finances. It is usually connected to a debit card that can be used to deposit or withdraw cash. Because of this, current accounts are extremely useful for managing daily finances with little to no hassle. There are several types of current accounts available, each with their own unique advantages, which makes them all the more flexible for your needs.

The Advantages of Having a Current Account

There are numerous advantages to having a current account. In fact, there are few advantages to not having one. Current accounts usually grant you a debit card and a cash card — often combined into one — as well as a chequebook. They may also allow for overdrafts on your account.

Current accounts enable you to use a debit card to pay for products or services instead of carrying cash. These purchases can be made in person and, of course, online. Cheques can also be used in connection with a current account. The benefit of this is that you have access to the whole sum of your money at any moment while maintaining a high degree of security over your finances.

Debit Card

Unlike cash, which once lost or stolen can be difficult to retrieve, modern current accounts have various fail safes and security measures to prevent unauthorized access by unapproved or malicious parties. Current accounts also allow you to make money transfers and use online banking services otherwise unavailable to those who only use cash.

Current accounts also allow you to receive immediate direct deposit payments, which saves time and protects your money. Your employer can deposit your pay directly into your account, which saves you the hassle of visiting a bank with a physical cheque. Instead, payroll can be set up to automatically deposit funds at the scheduled time.

Paying Bills

In addition to allowing you to receive payment directly from your employer, current accounts also allow you to set up recurring bill payments. This saves time and effort and avoids any shut-off or late fees since you do not need to keep track of multiple due dates to manually make payments. Instead, with your permission, your monthly payments are withdrawn automatically from your current account at the time you schedule.

Current account holders can withdraw money from cashpoint machines; this allows you to carry cash without taking the time out of your day to physically visit your bank. Most of the time, withdrawing money from a cash machine using a debit card is free. Convenience machines located in some businesses may carry small charges, as does using a credit card to make a withdrawal (the withdrawal itself also accrues interest like any other credit card transaction).

Watching your balance

You can keep tabs on your current balance by checking it on a banking website, a cash machine, or even on a smartphone via a mobile app. Services like these make it even easier for you to avoid accidental overdraft penalties. Even the post office now lets account holders check their balances online or via mobile and access their accounts remotely to make deposits.

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You will be able to apply for agreed overdrafts, which means you can spend a predetermined amount more than is currently in your account as a type of credit from your bank. Your deposits then go toward fulfilling this borrowed amount and restoring the account into the positive. Such options are especially beneficial when account holders have sudden unpredicted expenses and need some extra cash to get by until a later date. Banks often charge interest or a specified fee in exchange for using this option, and the interest may be at a higher rate than on other types of loans.

Not all banks charge interest on overdrafted accounts, however, which is why it is important to weigh your options before you decide what kind of account you would like to open and where. Overdrafts that are not predetermined with your bank can lead to higher charges, as well as exceeding the predetermined overdraft limit. Your bank may also charge transaction fees for every individual transaction that exceeds the agreed-upon overdraft. However, current accounts are now capped in how much they may charge in fees, penalties, or unexpected overdrafts. These caps are known as a monthly maximum charge (or M.M.C.) Amounts vary between banks and account types, so this is another crucial factor to consider when weighing your options.


In terms of savings accounts, there are other unique benefits. Taxpayers who pay basic tax rates may earn up to 1,000 pounds of interest on their account savings totally tax-free. Higher rate taxpayers are allotted up to 500 pounds before being taxed.

Different Types of Current Accounts

Current accounts, as we have discussed, are used through banks and building societies to manage daily financial transactions. They allow you to pay bills by direct debit or by scheduling a standing order, use your debit card to withdraw cash and make purchases, receive your salary automatically, and arrange for possible overdraft services.

  • Standard current accounts are, as the name implies, fairly straightforward accounts, usually with associated fees. If you open a standard current account, you will most likely be issued a debit card and a personal chequebook.
  • Packaged accounts are a type of current account that gives you many options for how to use the account and its attached financial services. These accounts have a higher associated fee because of these additional tools. Package accounts might include coverage for a car breakdown, travel insurance, and preferential interest rates when the account is taken into overdraft.
  • Jam jar accounts are sometimes known as budgeting accounts. As the name implies, a jam jar account is intended to help you maintain your budget. Cash can be divided into different “jars,” with amounts you predetermine after calculating how much you need for monthly expenses. The rest can be spent or saved as you wish. Like a current account, a jam jar account allows you to sign up for direct automatic bill pay and be paid via direct deposit. Jam jar accounts have monthly charges associated with them, and you may have to use a credit union to open one.
  • Fee-free basic accounts are available to those who are not able to open a current account because of their age or credit history. Banks will sometimes allow you to open a current account after possessing a basic account for a set amount of time and meeting other qualifications. Basic accounts do not allow for overdraft options but can serve many of the same functions that current accounts do, such as paying for purchases using a debit card and directly depositing funds.
  • Student current accounts are available for individuals who are in the course of completely university education. These accounts tend to offer more freedom in navigating overdrafts, with higher overdraft protection or options for avoiding interest during overdraft.
  • Premium current accounts offer a variety of other services, such as insurance or loan repayment options. These usually come with associated monthly charges in return for these services.

Some banks also offer the option of opening a youth account, a straightforward account that includes only basic services. Some of these accounts offer zero interest on overdraft fees up to a predetermined amount.

How to Choose the Right Account for Your Financial Needs

There are many resources available online to help you decide what type of current account is best-suited to your needs and finances. A financial adviser or bank representative can help you weigh your options and find out which one gives you the most benefits.

The first thing you should consider when opening a current account is the type of fee your bank will charge for its services. Fees vary widely from bank to bank and account to account, so it is important to closely examine all the terms.

If you overdraft your account often, you will want to ensure you choose an account with a low overdraft fee or one that allows overdrafts up to a certain amount without charging penalties. On the other hand, if you do not plan to use overdraft regularly, you can consider other accounts that offer interest on your credit balance.

It is also a good idea to consider what various aspects of your lifestyle, job, or hobbies might impact your finances as well as your insurance or coverage options. If you are a frequent traveler or are in the process of repaying a loan, it may be beneficial to consider a premium current account that offers insurance or loan services in exchange for extra monthly charges.

When comparing your options, you should also consider whether you prefer to bank online, over the telephone or in person and how frequently you are in need of banking services (such as round-the-clock customer service).

Who Qualifies for a Current Account?

Anyone over the age of 16 is eligible to open their own current account. Some banks choose to limit applications for accounts to those who are 18 or older but may also allow those who meet the minimum standard age to open accounts with their parents as co-holders. Various kinds of savings accounts are also available for those who are ineligible to open their own current account.

Applicants will need accepted proof of their identity, as well as proof of their current residence. This is a universal requirement for banks and is important for maintaining security. Some banks will also require a credit check before authorizing a new current account. This is usually the case if the current account you are opening will allow overdrafts. Additionally, depending on the bank you choose, there may be necessary minimum monthly payments to keep the account open. Most banks do not charge for account services as long as the account has a positive balance.

Proof of ID

If you do not meet the qualifications to open a current account, there are other banking options available to you. You will most likely still be eligible to open a savings account or a fee-free basic account.

What Else Should You Consider?

Fortunately, if you decide that you are displeased with your current account for any reason, switching banks is a relatively straightforward process. Almost every bank offers the Current Account Switch Service, which will complete the process in seven working days. Banks will handle the account and payment transfers for you, which means the process is largely stress-free. This is good to keep in mind if your financial situation changes in a way that makes another type of current account more beneficial — or if your first account simply turns out to be not what you expected.

The most important step for someone considering their first current account is to research the variety of account types, which of these are offered by banks available to them, and the specifics of their bank’s terms of agreement. It is a prudent move to compare bank and account options before committing to any one of them, so you can make a sensible and balanced financial decision.

For anyone who knows how to use it, a current account is a powerful financial tool that can improve cash flow, save time, making budgeting more convenient, and reward account holders with interest. The key is to know which account is the right one for your unique situation, and that involves considering your whole financial picture.

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Oliver Dale is Editor-in-Chief of MoneyCheck and founder of Kooc Media Ltd, A UK-Based Online Publishing company. A Technology Entrepreneur with over 15 years of professional experience in Investing and UK Business.His writing has been quoted by Nasdaq, Dow Jones, Investopedia, The New Yorker, Forbes, Techcrunch & More.He built Money Check to bring the highest level of education about personal finance to the general public with clear and unbiased