Current Accounts: No Longer an Option in Today's Society

At various times throughout human history there have been watershed moments that changed how people did business with one another. Centuries ago bartering was the norm. That was followed by a system that combined both bartering and cash which, over time, gave way to the mostly-cash basis that carried the world into the 20th century. With each of the transitions, people have had certain adjustments to make.

Current Account

In the 21st century, we are transitioning from a cash-based economy to cashless, digital systems. Part of that transition in the UK is the use of a current account as a means of paying for daily expenses. Current accounts are nothing to be afraid of, nor should they be something we just take for granted without looking for the best deal.

The Current Account Explained

Our consumer financial system in the UK is a bit different from most other countries inasmuch as we have a lot more options available to us. For example, in the United States there are only two types of bank accounts consumers have access to; they are known as "checking accounts" and "savings accounts."

In the UK, we have several different types of current accounts as well as different savings vehicles. The larger number of choices available to us makes it much easier for each individual to find an account that best suits him or her. In terms of the current account, it is the most frequently used in the UK.

The current account gets its name from the fact that it is designed as a financial vehicle to help you manage your current expenses. These accounts are typically fluid in the sense that as the money comes in, it goes right back out to pay bills. A current account is not used for saving purposes.

Different Kinds of Current Accounts

As we mentioned previously, there are different kinds of current accounts in the UK. You would choose the best account for you depending on how you want to use it, what your financial goals are, and what your credit history is. Below is a summary of the most common types of current accounts:

  • Basic Account - A basic current account is a fluid, "cash only" account. You are able to make deposits and withdrawals freely at any of your financial institution's branches. Sometimes banks will issue debit cards for these types of accounts. However, cheques are not issued to the account holder.
  • Standard Account - A standard account gives you a bit more flexibility. You can deposit and withdrawal as you can with a basic account, but you also get a chequebook, a debit card, and overdraft options. In most cases, standard accounts also allow access via telephone or online.
  • Packaged Account - This type of account has a lot of variation depending on who is offering it. However, according to The Co-operative, these types of accounts include extras like travel insurance and breakdown cover. The amount you save through these extras may be offset by the monthly fees you pay.

There are other types of current accounts available for specific groups of people, or to meet specific needs. Not all banks offer these special accounts for obvious reasons. Some examples would include:

  • children's accounts - sometimes paired with a savings vehicle
  • young person accounts - designed to help teenagers learn to manage money
  • student accounts - offering lower fees and better rates for university students
  • high earner accounts - offering special perks for high earners
  • religious accounts - designed for certain religious groups with restrictions on banking
  • foreign currency accounts - for people who regularly transact business in foreign currencies

When you are ready to open your own current account, be aware that you have quite a few options in terms of account providers. Obviously, the major high street banks all offer current accounts of various types. They may or may not necessarily offer the best package of rights and benefits.

You can also apply for current accounts with most building societies and Internet banks. Building societies tend to be more local in nature and, in some cases, may even restrict with whom they are willing to do business. The smaller size and more local focus of building societies do make them attractive to many people.

What to Look for When Choosing a Current Account

In choosing a current account, the first thing you need to understand is that your credit history will determine what is available to you. The worse your history, the less likely you are to get an account with many extra incentives. If your history is seriously poor, you may be limited to a basic account. Beyond that, here are some things to which you should pay attention:

  • Debit Cards and Chequebooks - Debit cards and chequebooks are not automatic with every current account. If these things are important to you then make it a point ask when you are first inquiring about an account. Keep in mind that a debit card is becoming more important with every passing day; it is one option you should not go without.
  • Bill Pay Schemes - The guide to current accounts published on the find.co.uk website mentions the ability to pay your bills from your account electronically. This is a very helpful feature for several reasons. It is especially helpful for those who want to schedule their recurring bills so that they are paid automatically.
  • Overdraft Protection - This "extra" is extremely helpful for those times when a bill comes due before you are paid. It also comes in handy should you make a mistake in your chequebook and write a cheque for more money than is currently available. Keep in mind there is a fee attached to using this protection.
  • Fees and Interest - When all is said and done, don't forget to make sure you know all of the fees attached to a specific account. There are monthly maintenance fees, overdraft fees, foreign transaction fees, and more. Hand-in-hand with the fee question is also how much interest you are earning on your account.

Switching Your Account

Despite all the advantages of the UK consumer banking system, one area where we are lacking is that of switching accounts. It's now a lot easier than it used to be, thanks to regulations that require banks to cooperate with one another, but switching is still very different here than in other places.

Switching your account begins by shopping around for what other banks or building societies are offering. Once you find a new account you like, you are required to fill out an application and submit it. The bank or building society has 10 business days to approve or reject your account. If they approve then they must open your new account within that 10 days.

Once your new bank approves, your old bank has three business days to transfer everything over. That includes your balance, standing orders, and so on. During that three-day period they must also supply you with your ATM card, PIN number, and chequebook (if applicable).

Most of the process is taken care of for you after your application is approved. However, it is always possible for things to get confused in the shuffle. To avoid problems it is a good idea to leave a little bit of cash in your old account until you are sure any outstanding items have cleared. In addition, you'll most likely be required to inform your employer yourself if you are paid through a direct deposit scheme.

When Things Go Wrong

Many current accounts are switched every day in the UK with most being completed issue-free. However, when problems do arise rest assured you are protected. As outlined by the British Banker's Association Code of Conduct, the bank with whom your new current account will reside is responsible for any costs associated with delays in switching your account.

If you believe either your old or new bank has not lived up to their obligations in helping you complete the switch, you do have a definite means of recourse. The process starts by contacting someone at the bank and explaining the situation clearly. Write down details of your conversation, including the names of anyone you speak to, as a record in your defence.

Next, contact the branch manager via a formal letter in which you clearly and politely explain your complaint. In most cases, this will resolve the issue without complication. If it doesn't then you can file a formal complaint with the Financial Ombudsman. They will help you navigate your way through the resolution of your problem.

Conclusion

Current accounts are a tool used by millions of people across the UK. They offer one of the best ways to manage your daily finances while also earning interest and taking advantage of extra benefits. If you are not currently using one of these accounts, it's something you might want to look into. It is a good idea to ask family members and friends who they use for their accounts; people you know are the most likely to give you an honest assessment.

Credit Card Usage

There are far too many institutions offering current accounts for us to list them all here. However, we have given you links to one high street bank, one building society, and one Internet bank. This will give you a good idea of what is out there. Keep in mind that finding the best deal means taking the time to shop around.

Lloyds TSB - A well-known name in the banking industry, Lloyds TSB offers consumers a choice among several different types of current accounts. You can compare online and apply when you are ready.

Cumberland Building Society - Offering members standard current accounts with many extra options available. Their website provides all the details along with a link you can use to contact an advisor and set up an appointment.

Smile.co.uk - Smile was the first Internet-based bank established in the UK. It is part of The Co-operative Bank founded in 1872. On this site, you can compare all of their current accounts as well as extra benefits available through each one. When you are ready to open an account, you can apply online.

It is fast and easy to compare rates on current accounts when you use a comparison website. These sites work with various financial partners to bring you the latest information to make your shopping as efficient and painless as possible. Here are links to some comparison sites where you can find current accounts information:

Go Compare - When you use this site to compare you can look at current accounts according to rates and fees or according to the features offered. For those who do not understand current accounts, there is a free guide available as well.

Money Supermarket - This site brings you comparisons on several different types of current accounts from multiple providers. Their rate and fee information is updated daily.

Confused.com - A site where you can compare current account rates and fees from providers like Santander and The Co-Op. To help make sure you know what you are looking for, the site offers a help and tips section free of charge.

Compare the Market - Here you'll find a table-based comparison of current accounts among several financial institutions. They provide information on credit rates, overdraft rates, and extra benefits.

Tesco Compare - This site offers current account comparisons through their online partner, LoveMoney. Before clicking that link take a few minutes to read the helpful information about current accounts Tesco provides.

uSwitch.com  - Provides users with comparisons on eight different types of current accounts. They compare interest rates, fees, and features among providers like Santander, Barclays, and NatWest.

Money.co.uk - More than 250 current account options are represented here. This site lays out the comparison in an easy-to-read grid that includes monthly charges, interest rates, overdraft fees, and more.

Money Saving Expert - Informative guides is what this site does best. Here you will find multiple guides and articles explaining everything you need to know about current accounts and consumer banking. It is hard not to find answers to your questions here.