Guide to Current Accounts

Loyalty is a wonderful thing - a virtue and a sign of dignity. However, in the world of current accounts, sticking with the account you've had since your first pay cheque could be leaving you unnecessarily short financially.

At easyMoney.com we want to help you make the most of the opportunities available to you and to capitalise on the great current account deals available. In addition to our price comparison tool, which will compare more than 300 current accounts, our exclusive current accounts guide will help you find the bank account that meets your needs.

What is a current account?

A current account is a safe place to store your money that comes with a chequebook and a cash card with most accounts also enabling Bankers Automated Clearing Services (BACS) payments so you can receive money transfers. Some offer overdraft facilities and, thought it is often overlooked, they also offer a rate of interest. This makes it vital to shop around as some current accounts offer 4% interest rates.

What types of current account are available?

There are lots of different types of current accounts on the market so be sure to pick one that best suits your needs:

• Current accounts with overdraft - These give you full banking facilities with easy access to cash and an authorised overdraft.
• Cheque accounts - These are 'instant access' savings accounts but with limited banking facilities.
• Basic bank accounts - No-frills current accounts aimed at those with no credit history. They do not offer an overdraft and basically just work with a debit card or cash card that checks your balance before allowing you to take money out of your account.
• Student and Young Person Accounts - These are designed to help young people learn how to manage their finances. These usually have interest-free overdraft facilities; a student adviser service and they could offer a credit card. There are also numerous additional incentives and offers such as gift vouchers, CD/DVD discounts, etc. Some accounts will pay interest on credit balance.
• Graduate Accounts - They aim to assist graduates with their cash and debt management up to three years after graduation.
• Foreign Currency Accounts - Run like standard current accounts but the consumer could use a foreign currency such as the US dollar or Euros.
• Current Accounts (with special offers) - These could offer incentives to join such as gifts or bonus schemes.

How should you manage your current account?

Too many people stick with the same current account and never bother to look around. This can leave them with a low rate of interest and a high rate on their overdraft facility - which can sometimes stretch to 18%. There are two main areas to look out for when deciding on the right current account for you:

• Interest Rates - If you are putting money into your account on a regular basis you deserve to reap the rewards, so look for a higher interest rate. However, be wary because some current accounts will only offer their higher rate for a limited introductory period before reverting to a lower rate, or the Bank of England Base Rate (BEBR), which can fluctuate.
• Overdraft Rates - If you think you are likely to need a little extra from time to time it is important to find an account with a cheap overdraft facility. Again, some may offer overdraft rates for a limited time to entice you, so be wary of the offers you receive.

Direct debit allows you to budget properly as well as providing an easy-to-use and safe method of paying directly out of your account and as such is a preferred option.

Think about how accessible your account is and how often you receive statements, and look into the possibility of managing your current account online. Online current account banking regularly offers the best interest rates because the banks save money on overheads. There is also account aggregation, which allows you to bring all of your accounts on to one webpage.

Also remember to look into the withdrawal limits placed on your account. Normally this will be in the region of £200-£250per day.

Current account checklist

Here are some things to look for when deciding on the right current account for you:

• Is a chequebook provided? Does it come with a card and what is the card's limit?
• Do you receive a cash machine card? What is the withdrawal limit?
• Which cash machines can you use without being charged?
• What are the interest rates?
• Is an overdraft facility offered and if so what are its rates?
• Are there any introductory offers?
• Will you get preferential rates on other products?
• Can you manage the account online?
• Can you use direct debit to save time and help you budget properly?
• What charges are made on the account?

Be wary of fees

As with all types of accounts, there are fees waiting to catch you out. The obvious fee with a current account is for slipping into an unauthorised overdraft or exceeding your overdraft limit. This could mean an immediate charge or a percentage penalty. Also be wary of premium accounts. Though your bank could offer you incentives to join a premium offer there will usually be an annual fee, so think carefully before you opt for this route.

Additionally, look out for cash machines with charges - they are becoming increasingly frequent and if you are educated on which machines charge, you can avoid unnecessary expenses.

How to apply

Though you can apply over the phone or call in at your local branch, if you've decided you want to open a current account the first step should be to use the price comparison tool at easyMoney.com. This will allow you to compare more than 300 current accounts simply by filling in the tables. In two minutes you can see the range of offers available to be sure you're making savings and getting the best current account deal for you.

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