What is a current account?
A current account is a type of everyday bank account that’s designed to help you manage your money.
It gives you instant access to your funds, so you can use it for your day-to-day spending, and it’s usually the bank account that’s used for most of your transactions.
Your salary, pension and benefits can be paid into it and you can set up direct debits and standing orders from it, or use it to pay bills and make purchases instantly.
When you open or switch to a new current account, some banks will reward you with free cash, a competitive overdraft facility, or an appealing interest rate.
Types of current account
You can choose from a range of different current accounts. Which type is best will depend on your financial situation and what you need from your account.
Standard current accounts
Also known as an everyday current account, this type of account comes with a debit card and access to online banking. It might also give you the option of having an arranged overdraft and a chequebook.
These accounts are usually free, as long as you don’t go over your overdraft limit, and tend to pay little to no interest on your balance.
Basic bank accounts
These bank accounts are typically a stripped back version of standard accounts and are generally aimed at people with a poor credit score.
They usually offer the same services that you get with a standard account but without the option of an overdraft or chequebook. There may also be restrictions on how much you can withdraw from cash machines in a single day.
Packaged bank accounts
It’s important to consider whether you would actually make use of these perks, and what they would cost you if you bought them individually, before signing up to a packaged bank account.
This could be the right option if you’re looking for a better rate of interest than a standard current account.
Not all current account providers offer accounts paying high rates of interest however, and those that do may have certain restrictions in place such as how much you need to pay in each month, how long the interest is on offer for, or how much of your balance even qualifies for the interest rate.
Cashback current accounts
With cashback current accounts, you’re rewarded when you use it for certain types of spending, or when you pay in a set amount of money each month.
Some accounts will pay you cashback when you pay certain household bills by direct debit from your account, while others give you money back when you spend in certain shops. However, some reward accounts charge a fee which could outweigh the cashback benefit - it’s important to work out how much you are likely to get in cashback and whether that covers the fee at the outset.
Student bank accounts
If you’re heading off to uni, a student account could help you manage your finances. You can pay money in and use it to pay your bills or take out cash. Student current accounts usually offer interest-free overdrafts and other benefits like free railcards or gift cards.
Some overdrafts are tiered, so you get a higher limit as you progress through your course, but you’ll still need to stay within the limit to avoid charges.
How to switch current accounts?
It’s a good idea to compare current accounts to make sure you’re getting the best deal. If you find one with a better interest rate, or more features and benefits, it’s easy to switch.
The current account switch service (CASS) makes it easy, guaranteeing to complete your switch within seven working days.
This free-to-use service will automatically move your regular incoming payments, like your salary or benefits, and outgoing payments like direct debits and standing orders, and will transfer your old balance to your new account.
All you need to do is:
- choose a new account
- check you’re eligible and agree any arranged overdraft
- pick a switch date
- let your new bank or building society do the rest
How long does it take to switch accounts?
The CASS guarantees that your account will be switched over within seven working days.
But if you set up any new payments during this time they won’t be switched over - you’ll need to wait until your new account is fully set up.
Your incoming payments will switch to your new account along with any standing orders and direct debits. And don’t worry, any payments that go to your old account will be redirected.
On the switch day, your balance will transfer to your new account and your old one will automatically close.
What benefits can you get by switching current accounts?
There are many reasons why you might want to change your bank or building society and there are lots of perks you can enjoy by switching.
Depending on the account you choose, switching could earn you free rewards like a cash incentive or other benefits like free cinema tickets, discounts off your favourite stores, travelcards and more.
Save and earn money
Getting a better interest rate on your balance can help your money grow. Plus, you may be able to earn cashback.
Switching can mean you benefit from a lower overdraft interest rate or you may be given a higher overdraft threshold. You may even find a bank that won’t charge you for using your overdraft.
Get more control
Switching banks could mean you have a local branch that’s closer to you and an account that gives you access to better services - like a 24-hour helpline and user-friendly apps that let you check your balance and manage your money from your phone.
What should I look for when comparing current accounts?
When you’re exploring options for a new current account, it’s important to find one that will work best for your needs.
Think about how much you plan to pay in and withdraw each month and whether you’ll need an arranged overdraft.
When you’re comparing accounts you should consider:
- Interest rates when you’re in credit
- Overdraft interest rates and limits
- Features and incentives
- Level of customer service
- Monthly fees you may have to pay
- Any minimum monthly pay-in rules
You should also think about how you like to do your banking. If seeing someone in person is important to you, you’ll need a bank with an easily accessible branch. Similarly, if you prefer internet or telephone banking, check what options are available.
Why compare current accounts?
It might be easy to simply opt for a well-known bank or building society, but it’s still worth comparing the options available.
This way, you can avoid missing out on cash incentives or better interest rates for your balance and overdraft.
You might find you can save on fees and charges, which can vary a lot between banks and types of current account.
And it could mean you benefit from added perks and helpful features like budgeting tools and the ability to apply for an overdraft online.
Finding the right account for your needs could make your life much easier and potentially save you hundreds of pounds.
Choosing the best current account for you
There are plenty of options on the market, so to help you find an account that will make a difference to your finances, look out for:
Some current accounts, particularly ones with rewards, come with monthly fees. Compare costs and other charges you might have to pay while using your account
Find out if you can have an arranged overdraft and what interest you might be charged. It’s still possible to switch accounts when you’re overdrawn if you have a good credit history
Make sure you’re likely to use and earn any rewards or benefits you might receive so that it’s worth paying the monthly fee
Some packaged current accounts include travel insurance. Make sure this provides the cover you need before travelling and that you’re not doubling up with another policy
If your account includes breakdown cover as part of the monthly fee, look to see if it includes everything you need and check you can’t get it cheaper elsewhere
Mobile phone insurance
One of your current account perks might be mobile phone cover, so check your account includes this before you buy a separate policy for your phone
Home emergency cover
Some current accounts come with 24/7 home emergency cover to help you if an unexpected disaster strikes, like a burst pipe. Just make sure you’re not doubling up with an existing policy
See how your banking app compares. Some give you real-time spending notifications, features to help you budget and will let you manage your money on the go
What’s the difference between an authorised and unauthorised overdraft?
An authorised or arranged overdraft is one that’s agreed with your bank in advance - you might be offered one automatically when you open a current account, but you’ll have to pass a credit check to be accepted for one.
You may never need it, but if you do, an arranged overdraft lets you borrow more money than is in your account up to an agreed limit. You may be charged interest for using your overdraft, which can get expensive if you go over your pre-agreed overdraft limit.
This type of overdraft is when you go overdrawn without having agreed an overdraft with your bank beforehand. Similarly, spending more than your pre-agreed limit will also take you into an unauthorised overdraft.
You’ll be charged interest for using an unarranged overdraft and it’s likely to damage your credit score, making it harder to borrow in the future. Some banks have a monthly cap on charges and they may decline any transactions you try to make until the debt is paid.
Can I have more than one current account?
Yes, you can have several current accounts and doing this can sometimes make managing your money easier.
For example, you might have one account for your own personal spending and a joint account with your partner to cover household expenses.
There can also be other benefits to having more than one account, as this can let you take advantage of various incentives, interest rates and overdraft limits.
Just make sure you can meet the minimum requirements of each account and be careful not to open too many at once, as this could negatively affect your credit score.
Can I get a current account with bad credit?
Yes, you can open a current account if you’ve got a low credit rating, but you may be restricted in the type of account and features you can get.
When you apply for an account with an overdraft facility, the bank will do a credit check. If you’ve got a bad credit score, it’s unlikely you’ll be accepted.
However, most banks won’t do a credit check for a basic bank account. And you’ll still be able to get many of the features that come with standard current accounts, like a debit card and online banking.
If you open a basic account and use this to manage your finances and pay your bills on time you can improve your score - this can help you access other types of account in the future.
Frequently asked questions
This will depend on how you use your current account, as your credit score relates to your ability to repay debt.
For example, having a healthy bank balance without an overdraft won’t have any effect on your score, but setting up direct debits and showing a track record of timely payments will help boost your rating.
Using an authorised overdraft occasionally won’t make a difference. But relying on it every month can suggest you’re struggling financially and could lower your score.
On the other hand, using an unauthorised overdraft - where you’re borrowing money without permission - will leave a mark on your credit history and can make it harder to borrow money in the future.
It’s also best to avoid opening a joint current account with someone with a poor credit history. You’ll be co-scored, so your partner’s credit rating could affect yours.
Yes, it’s easy to open a joint current account. You can do this online or in a branch.
Having a joint account can simplify how you manage your money together. Plus, it can make good sense if you’re sharing the cost of rent or a mortgage, or trying to save together.
You could either have one account that you both use. Or you might each have separate current accounts and pay a set amount into the joint account each month.
But bear in mind that if one of you has a poor credit rating, opening a joint account could affect the other’s score.
Current accounts are normally used for everyday transactions like paying bills and withdrawing money. You’ll usually be given a debit card and cheque book, and your bank may require you to pay in a minimum amount each month. Some accounts offer an arranged overdraft facility which allows you to spend more than you’ve got in your account.
Savings accounts usually have higher interest rates than current accounts (this isn’t always the case though). Instead of using it for transactional activity, you leave your money in the savings account for longer periods of time to help you earn more interest. To get the best interest rates there’s typically a limit on how often you can access your money.
It’s important to check that your current account provider is a member of the Financial Services Compensation Scheme (FSCS). This means that the first £85,000 you have with them is protected in the event that the provider goes bust.
Many current accounts require you to pay a minimum amount into your account each month, which could be between £500 and £1500.
Because of this, people often choose to have their salary or pension paid into the account.
However, there are some current accounts which don’t ask for a minimum monthly deposit, so it’s a good idea to shop around if you’d prefer to have more flexibility.
Yes, as a parent or guardian, you can open a current account for your child. They’re usually available to children who are aged between 11 to 17.
Children’s current accounts work in a similar way to adult bank accounts, but usually come with some limits and restrictions.
For example, there are usually no monthly fees and no overdraft options, so your child can only spend what they have in their account.
As the adult opening the account, you can normally set some restrictions for your child, like blocking certain payments or setting a limit on transactions and cash withdrawals.
No, only your new bank will need to know and this will be done when you apply for your account.
More than 40 UK banks and building societies use the CASS. As part of this seven-day service, the new bank will contact your old bank to let them know you’re moving.
Your new bank will also ask them to close your account once everything has been safely transferred across.
If your bank hasn’t signed up to the CASS, all you need to do is let your new bank know you’d like to switch and they’ll contact your old bank to tell them you’re switching and to get the details of all your direct debits and standing orders.
Switching without using the CASS will normally take longer than seven working days.
Yes, if they are over the age of 18, it’s possible to add a person to your current account turning it into a joint account.
Depending on your bank or building society, you’ll be able to do this online or by visiting a branch. You’ll both usually need to provide some ID and proof of address.
Just be aware that if one person has a bad credit score it’s likely to impact the credit rating of the other account holder.
Current accounts normally have two types of interest - one is added to your balance when you’re in credit and a different one is applied to your overdraft.
You can also get high-interest current accounts that let you earn a better interest rate than normal, but you may have to pay a monthly fee and the overdraft charges are often high.
To get the most from your current account, the best combination is a high interest on your balance and a low interest rate on any overdraft - so make sure you shop around and compare options before you decide.