This guide to choosing the right bank account is for you if you’re trying to decide what type of account best fits your needs or you want to know which features of an account you should compare. It can also help if you’re thinking of switching your bank account.
- Choose the type of account that suits your needs
- Comparing account charges and features
- Decide how you want to deal with your bank
- Compare different accounts using comparison sites
- Is it worth switching your bank account?
- If you’re claiming Universal Credit
- Watch our video – How to open a bank account
Choose the type of account that suits your needs
Current accounts
Most people use a current account with a bank or building society to manage their day-to-day money.
It allows you to:
- Pay bills by Direct Debit or standing order.
- Receive automated payments such as salary, wages or benefits.
- Access to an overdraft, although this will need to be authorised by the bank.
- Pay for things with a debit card and withdraw money from cashpoint machines.
To help you manage your money you can:
- Make use of the secure bank app, to check and make payments.
- Set up text alerts, to warn you of a low balance.
Packaged accounts
If you’re thinking about opening a packaged account, be sure to check out how many of the additional benefits you would actually use and whether you can get them cheaper elsewhere.
Some current accounts offer extra features for which they charge a fee (often between £10 and £15 a month).
These are known as packaged accounts.
Extras include:
- Special offers (e.g preferential interest rates on overdrafts).
- Car breakdown cover.
- Insurance cover (e.g travel or mobile phone insurance).
- Extra services.
Fee-free basic bank accounts
A fee-free basic bank account may be worth considering if you can’t open a standard current account, possibly because your credit rating is low or because you’ve not got a credit history. Once you’ve had one for a while a bank may offer you a current account.
A basic bank account doesn’t have an overdraft facility but does allow you to:
- Pay bills by Direct Debit or standing order.
- Receive payments such as salary, wages or benefits.
Jam jar accounts
These accounts are sometimes called budgeting accounts or rent accounts and are designed to help you budget.
They let you divide your money into different ‘pots’ or ‘jars’.
You decide how much money goes into each pot by working out how much you need for your bills and how much is left over for spending or saving.
They also allow you to:
- Pay bills by Direct Debit or standing order
- Receive payments such as salary, wages or benefits.
One disadvantage of these accounts is that they charge a monthly fee. You’ll also often have to go through a Credit Union or housing association, but they may pay for the fees for you.
A jam jar account might be right for you if:
- You want an account that helps you to budget
- You want to avoid charges for refused Direct Debits
- You rent a council or housing association property – in which case your landlord might pay the monthly fee for you
Bank accounts for students and graduates
Most banks offer a specific student account, usually with an interest-free overdraft up to an agreed amount.
Banks often offer attractive accounts to graduates to try to secure them as long-term customers.
Bank accounts for prisoners or people with convictions
If you’re in prison or have a conviction, you may be able to get a basic bank account. Banks don’t have access to criminal records, but they do have systems to detect applications from people who have a record of fraud or related illegal activities.
All banks and building societies can reject applications from people who have a record of fraud.
They can also reject you if you’re an undischarged bankrupt, which is when you’re still going through the process of becoming bankrupt.
Comparing account charges and features
Fees, charges and overdraft costs
Use our Bank account fees and charges comparison tool to see all the fees and charges that apply to bank accounts – it shows everything from overdraft fees to foreign cash withdrawal charges.
Fees can vary a lot between banks and between accounts, with one of the highest fees being charged for going over your agreed overdraft limit (if you have one). Did you know you could save hundreds of pounds with an account that better suits your needs?
If you regularly spend more than you have in your account, choose one that will give you an overdraft up to an agreed limit without charging fees and/ or with a low interest rate.
Read our Overdrafts explained page to understand how they work and how to cut the costs and avoid charges.
Interest rates on credit balances
If you’re careful about your spending and never go overdrawn, have a look at the accounts that pay interest on your credit balance.
However, if your earnings are on the low side and you do sometimes use your overdraft, don’t pay too much attention to the credit interest – focus more on the charges instead.
Incentives
Comparing your accounts
Banks can also offer account dashboards, which let you see accounts from multiple banks and building societies side by side online. This lets you see the differences in things like charges and fees.
Many banks offer deals to attract new customers, but be sure to check if there are strings attached.
Look beyond any short-term offer and make sure that, when it ends, the account will still be the best for you.
Deals include:
- A cash incentive.
- Higher interest for a period.
- A monthly credit of usually around £5.
Customer service
You can use the Which? quality rating customer score to find the banks with the best customer score. The rating takes into account things like service performance and dealing with complaints so you can find a bank that suits you.
Decide how you want to deal with your bank
Do you like dealing with a person in a branch or would you prefer the convenience of telephone or internet banking? Not all banks will have a branch near you or let you have internet access to your account, for example.
When you’re looking for your account, check how the bank lets you access it and which ways are important for you:
- Telephone banking.
- Internet or mobile banking.
- Cashpoint machine near you that’s free of charge to use.
- By post.
- Branch service - if you like going into a branch, choosing a bank you can easily get to will be the most important factor.
Compare different accounts using comparison sites
Comparison websites are a good starting point for anyone trying to find a current account tailored to their needs.
We recommend the following websites for comparing current accounts:
- Go Compare – This also allows you to use the government-backed Midata tool to securely upload your past transactions for customised current account recommendations.
- Moneyfacts.
- Money Saving Expert.
- Which? – You can use the Which? quality rating to find the banks with the best customer score.
In Northern Ireland, you can also try the Consumer Council Comparison Tool.
Remember:
- Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
- It is also important to do some research into the type of product and features you need before making a purchase or changing supplier.
Is it worth switching your bank account?
If you’re unhappy with the service you are getting from your current bank or building society, it’s easy to change.
Your new bank will do the work for you and there’s no need to deal with your old bank.
It’s worth checking every year that your bank is offering everything you need. If not, think about switching.
It takes just seven working days to switch your account under the Current Account Switch Service, almost all banks and building societyssocieties offer this.
You choose the date you want to switch, and agree this with your new bank.
They will arrange to move all your incoming and outgoing payments to your new account.
It’s backed by a guarantee that means you’ll be refunded any interest and charges on your old and new accounts if anything goes wrong.
If you’re claiming Universal Credit
Follow the link below to find out what your account options are and the pros and cons of each one.
Watch our video – How to open a bank account
Read a transcript of this video (DOC 26.5KB)
This article is provided by the Money Advice Service.
