Current Account Types

Types of Current Accounts

What types of current accounts are there?

With an array of current accounts to choose from it’s essential to think about which one would benefit you most. Although switching is becoming easier people often find they stick with the same account for quite some time, so be sure it’s the right one for you.

Low overdraft rates

If you know you’re likely to fall into the red at the end of most months you’ll be best off with a current account that has low overdraft rates. Even then you’ll be given an overdraft limit and if you exceed this you could be liable to substantial charges. If the account imposes daily fees for being overdrawn, it’s easy to rack up fees of hundreds if not thousands of pounds over a year, so be sure you understand the charging structure and if necessary talk to the bank for clarification.

Interest paying accounts

If you have money left each month after paying your household and general living expenses it’s worth investigating accounts that offer a competitive rate of interest. Some accounts don’t pay any but others offer a flat rate or tiered rates depending on how much you pay in each month. Again, it’s important to read the small print as sometimes the higher rates of interest are only available to new customers for the first year.

Cash back accounts

A few accounts will offer cash back on some of your spending. The way this is paid varies from account to account. You can earn anywhere from 1-3% cash back on selected household bills with some banks, whilst others offer a monthly bonus if you pay in a minimum sum and stay in credit each month. Many banks offer cash back simply for switching to them, but this needs to be weighed against interest you might lose or charges you might incur if you switch.

Packaged accounts

More and more banks are now offering what are known as Packaged Accounts. These are current accounts that charge a monthly fee in return for a range of benefits such as travel insurance, car breakdown cover and mobile phone insurance. Fees can range from as little as £6 a month to £20 plus, although the level and quality of the benefits are likely to be reflected in the price. It’s important to decide if you will actually use all of these perks and always check the details – for example if the travel insurance covers business travel, and what the excess on the mobile phone insurance is. Also check you’re not already covered or paying for these things elsewhere.

Customer service is a big factor!

Some banks have an excellent customer service record and if you prefer the personal touch this can be an important factor. Sometimes you can buy ‘fast track service’ as part of a Packaged Account but if that’s a step too far it’s worth reading customer reviews to get an honest insight into the level of customer satisfaction.

Because your current account is the one you’re likely to use most frequently, probably on a daily basis, other things to look at may be: the number and location of high street branches; whether the bank offers reliable online banking; if this is available as a phone or tablet app and if you need to link your personal banking with your business banking. Choosing a current account is likely to be one of the most important financial decisions you make in managing your money, so take some time to fully consider the options.