Bank Accounts

The different account types that are available to adults are:

Standard accounts, which offers you all the 'standard' account features, but nothing extra. These accounts may or may not charge a monthly or annual fee.

High interest current accounts offer you a competitive interest rate on funds up to a certain balance and/or monthly cashback for keeping your account in credit. These accounts may come with monthly fees, and will likely require a certain income and number of standing orders or direct debits, but could offer you some extra cash on a monthly basis if you use them well.

Basic or guaranteed accounts usually don't offer an overdraft so you can't get into the red. These accounts are designed for those with bad credit or no credit history. To that purpose, guaranteed bank accounts don't even require a credit check. In exchange for letting people with bad credit bank with them, they may charge certain fees, which makes them less attractive to people once they've improved their credit score.

Accounts with overdrafts allow you to go into debt on your account without being charged huge interest rates or excessive (or even any) fees. Some of these accounts will however charge monthly fees, and the overdraft deal may be limited to arranged overdrafts (where the provider has agreed that you can go into debt on your account up to a certain limit).

Free bank accounts won't charge you a monthly fee (though they'll likely still come with fees for overdrafts, etc.). They may offer in-credit interest, overdraft deals or other enticements, and may have funding requirements.

A packaged bank account is a current account that includes additional products and services – such as breakdown cover, mobile phone insurance, travel insurance, home emergency cover – exclusive access to other products from the bank, for example an exclusive rate of interest on a savings account and retailer offers and discounts. These accounts usually charge a monthly fee. Read our guide to packaged bank accounts to learn more. 

Designed to meeting the financial needs of students, student bank accounts tend to offer the same features as standard bank accounts alongside interest-free overdrafts and student incentives such as discounted rail travel. 

Most banks and building societies allow you to open a bank account in a branch, online, by phone or by post. The channel to open a bank account is dependent on the bank or building society and can be restricted for certain brands and products. For example, some of the challenger banks will only let you open an account using their mobile app and some bank accounts are only available online. Here are our seven steps to opening a bank account:

You can choose a bank account based on the channel you prefer to use to do your banking, such as online or in a branch. You may also want specific features and rewards such as an agreed overdraft, inclusive insurances and rewards or charitable donations.

If you are over 18 and have lived at the same address (and been on the electoral roll) for a number of  years, it is likely that you will be able to open a bank account online without the need to write or send anything such as an application form or identification in the post.

Each bank account will have a required minimum age, place of residence (some accounts are only available in Northern Ireland or Scotland for example) and some accounts may have minimum salary requirements too.

The bank or building society will run a credit check (unless it is a guaranteed bank account, which doesn’t require this). Make sure you know your credit score before applying, a stronger score will increase the number of banks that will accept you.

Our tables above show which products are available through the Current Account Switch Service. This service makes sure all of your regular payments are moved to your new bank account without you needing to do anything.

To open or switch a bank account, you will need valid ID and proof of address. You may be able to do this electronically online or your bank or building society may request posted certified copies or ask you to take these into a branch. 

These arrive usually around one to two weeks after your account has been opened. Our banking service standards shows which banks perform best at shipping out new cards.

You should receive instructions from your bank or building society about how to access your account securely online or via an app.

A current account suits anyone who wants or needs full access to the banking system. People with either no credit rating, or who have had credit problems, may not be granted a current account, but should be able to get a basic bank account. There are various account types to suit different people. The exact current account that would be most suitable to your needs will depend on several circumstances but given the number of accounts available on the market, there should be a suitable deal to be found. As account perks and features change over time, it’s probably a good idea to keep an eye on the market and consider changing your account if you’re not getting the most out of your current one.

Now that you've got some idea of what current accounts there are to choose from, you'll have to determine which is the best current account for you. This will of course depend on your personal circumstances. If you're often overdrawn, you'll likely be drawn to an account with overdraft facilities. If you never go overdrawn, on the other hand, you might want to take advantage of a high interest current account instead.

If you're looking for the best current account that gives you something back, a switching incentive might lure you in with an offer of up to £100, or sometimes even more, straight away. However, a little bit extra every month might work out as more lucrative over the long run, so you may want to consider a cashback or interest-paying current account instead. Regardless, remember that a lot of incentives will require you to close your old account, so you can't just open an extra account for a cash offer.

Whatever you are after, make sure to compare current accounts on all their features, not just their benefits, otherwise you might find that a cashback offer is undone by a high account or overdraft fee. Once you've made your choice, it's easy to switch bank accounts, especially thanks to the Current Account Switch Service and its accompanying guarantee. Read our current account switching guide to find out which providers offer it – you'll find that almost all do nowadays.

Note that a lot of banks now offer smartphone apps that let you do your banking on your phone. Some banks are even smartphone-exclusive, so you won't be able to access your account any other way. Look at the account management options before you decide on an account – it may have all the features you're looking for, but if you can't use it in the way that you like, you will likely end up regretting your choice.

A savings and current account are by no means mutually exclusive. In fact, it's probably a good idea to have both. You may even require a current account to be able to open some loyalty-based savings accounts. An easy access savings account can complement your bank account perfectly, as it allows you to put your money aside while getting a hopefully competitive rate of interest, and you'd still be able to access the funds should you need them. For better rates, you'd need to put your funds aside for longer, in a fixed rate bond for instance, or keep adding money every month to a regular savings account.

If you really only want one account, some high interest current accounts could be used as a form of savings account, but given their restrictions they’d only be suitable for smaller savings pots. Remember that there's nothing stopping you from getting a combination of account types.

Fees

Some accounts charge a fee, normally to offset the cost to the bank of some other benefit available with the account, such as a lower overdraft rate, higher interest for in-credit balances, or a higher overdraft buffer amount. Depending on your circumstances, the extra features could outweigh the fee, making it beneficial regardless. Other benefits that may be available on packaged accounts with a monthly fee are travel or breakdown insurance, discounts in certain shops or access to executive lounges at airports. While these extras could add up, remember that free banking is still widely available, so don't pay for things you don't need.

Funding requirement

You may be required to pay in a minimum amount of money per month. Usually, this restriction is applied to high interest current accounts, which offer a decent in-credit interest rate in exchange for your commitment and regular income. Aside from a minimum monthly funding amount, these accounts may require you to hold several direct debits on it, to make sure your account with them is your main banking product.

Credit interest

Competitive interest rates – some even inflation-beating – are available on high interest current accounts, but they may only be paid on the first part of the balance. After this, interest may not be paid at all, or at a very low rate, so you may want to maximise your returns by placing any money above this amount in a separate savings account. Note that these accounts do tend to come with high overdraft rates, so you should only consider an account that offers credit interest if you’re not someone who regularly goes overdrawn.

Overdrafts

Overdrafts are basically a form of credit; they're a facility that allows you to overspend, so should be avoided if possible. There are two sorts of overdraft: arranged overdrafts, where the bank agrees an amount by which you can go overdrawn, and unarranged overdrafts, which occur when you either exceed your arranged overdraft or go overdrawn without having an arranged overdraft.

If you are likely to dip into the red on your bank account, you should consider an account that charges a low rate and/or fee for arranged overdrafts or allows you to go overdrawn by a certain amount (called a 'buffer zone') before you get charged. This can prove to be very valuable if your income and outgoings are nearly the same and your account balance goes near or below zero on a regular basis.

While you should be aiming for only arranged overdrafts, you may also want to look at what rate you'll be charged on an unarranged overdraft should you go overdrawn unexpectedly, as these usually have higher rates or fees than arranged overdrafts. Overdraft fees and interest can vary greatly between banks, so it's well worth shopping around. If you don't have an overdraft facility (which will be the case for basic bank accounts), it's doubly important to make sure you have enough money in the account to meet payments, as you may be charged a fee if a payment cannot be made.

Access to the account

Make sure you choose an account that you can access how you need. Some accounts are only accessible via internet and phone, while others allow you to deal with your account through branches and even the Post Office. This can be especially handy for paying in cheques or cash. While most banks will now offer contactless as standard on their debit cards, this easy payment method may not be available with every account. So, if you want to be able to spend small amounts of money without having to put in your PIN number, you may want to ask your bank whether they allow contactless payments before committing.

Cash machines

Similarly, you’ll want to make sure that your account allows access from a wide range of cash machines and that these transactions are free. Just about all bank accounts give you a card so you can get money out of cash machines. Most transactions will be free of charge, but if you use cash machines in places like petrol stations, amusement arcades or nightclubs, you may be charged. It's worth understanding what type of cash card you'll get, and whether it is widely accepted, e.g. at Link machines.