A current account is a bank account that gives you instant access to your money and is most commonly used for everyday spending.
Your salary, pension and benefits can be paid into it and you can use it to set up direct debits and standing orders, or to pay for bills and purchases immediately.
You can switch your account to another bank or provider to make the most of rewards and offers. Some banks will give you free cash, low or no overdraft fees, or a better interest rate just for switching to its current account.
To find those rewards and the right account for you, you can compare current accounts.
There are lots of different types of current account to choose from, some will be free but others will charge you a monthly fee.
Many accounts now offer switching incentives - cashback, gift cards or a higher interest rate are just a few examples - but make sure you check the small print so you don’t end up paying more for a small cashback incentive.
Many of these accounts also offer an overdraft facility - so if this is an incentive you’re likely to use, check how much interest you’ll be charged, if any.
If your current account is in credit when all the bills and outgoings are covered, perhaps look at a higher interest rate to earn on your balance.
If you find yourself short at the end of the month on occasion, you might benefit from an overdraft facility to give you some breathing space. Look at the overdraft limit and compare the charges that may apply. Don’t be tempted into negative credit by your overdraft though.
If you’re just looking to change bank or account, or you’re chasing rewards and cashback, watch out for monthly charges that may claw back any surplus you accumulate. But some current accounts have no charges and you may get some positive interest when you’re in credit too.
You may find that you have fewer choices between current accounts if you’ve got a poor credit history. Overdrafts and in-credit interest aren’t usually part of the package. Bad credit current accounts are generally for people with a poor credit history and there to help if you’re managing debt.
There are a few different types of account to choose from - you just need to pick the right one for you.
These can be a great option if you have a poor credit score and just like your bank accounts without all the bells and whistles.
You’ll have all the standard features of a current account - for example, you can pay in money in cash or cheque form and set up direct debits, but you won’t have access to an overdraft and you may not be given a debit card.
These are current accounts with extra benefits like travel insurance, breakdown cover or mobile phone insurance included. You could even get discounts at chosen restaurants.
You’ll be charged a monthly fee and you’ll want to check whether you actually have any of the perks already so you’re not doubling up on insurance - if that’s the case, you’ll be paying for nothing.
Look out for a high annual equivalent rate (AER), which is the interest you’ll earn on your bank balance.
In a bid to attract customers, banks and building societies are offering current accounts with appealing interest rates, in some cases they could even be higher than easy-access savings accounts.
They could have strict criteria for you to follow, like paying in a minimum amount each month, so read the terms and conditions carefully.
If you have your own company, you may want to think about a business bank account which allows you to keep track of your business expenditures. Some will give access to an overdraft facility too which could help with cash flow.
However, it’s likely that you’ll be charged a monthly fee and perhaps even a transaction fee.
How your cashback current account works will depend which one you choose. Some offer it in the form of a percentage reimbursement (around 1-2%) on your household bill payments. Others will give money back when you spend in certain shops.
You may be charged a monthly fee for the privilege though which could outweigh the benefit of any cashback.
Heading off to university is an expensive time and the right student current account can really help, especially if it has an overdraft with a long 0% interest period.
Some may even have freebies to tempt you, but it’s important to make sure it has the key features you need. Stay out of the red to avoid being charged unplanned overdraft fees.
By not comparing current accounts, you could be missing out on helpful incentives, or better interest rates on your in-credit balance.
Perhaps you’re paying a higher fee on a overdraft facility than you need to? Or paying for account services you don’t require, like breakdown cover or mobile phone insurance.
Always make sure you know the fees and charges relating to an account and what they cover so that you’re not doubling up on insurance.
Some accounts have certain terms attached to them. For example, you might have to manually switch direct debits to your new account, or deposit a certain amount per month. If you don’t follow the guidance, the bank may not honour the switch
If you use the seven day current account switch guarantee, you will have to close your old account, this will be done automatically and all payments will be transferred to your new account.
Most accounts come with a debit card and online banking, as well as a mobile app. Some won’t, so if you need them for your day-to-day money management, make sure they’re included.
With so much choice on the market, you need to find the account that’s going to make a difference to your finances.
Look out for:
Accounts that give you extra, like packaged and cashback current accounts, could charge you a monthly fee
Would it be useful to have an authorised overdraft? If so, consider the options available and whether you’ll have to pay a fee for going overdrawn
Consider whether the monthly fee will wipe out any cashback you would receive
Some packaged current accounts offer travel insurance policies as a perk. Make sure it provides the cover you need before travelling though
If your account includes breakdown cover, take a look at the terms and conditions to see if it includes everything you need
Avoid doubling up on insurance by checking if you already have mobile phone cover from your bank account before buying a separate policy
You could have access to 24/7 home emergency cover from your bank if an unexpected disaster strikes, like your pipes bursting
There may be a switching reward or a refer a friend scheme for opening an account with a different provider
Some accounts will require you to meet certain criteria to open an account with them, for instance, paying in a certain amount each month
This is arranged with your bank and will have a predetermined limit - you’ll have to pass a credit check before being accepted.
You may be charged a small fee for going into your authorised overdraft but be careful not to go over the limit as you’ll face steep charges.
This type of overdraft is when you go overdrawn without having an authorised overdraft in place and it’s a bad idea.
You’ll be charged for going into the red and it can get expensive, really quickly. There may be a cap on charges, but you should steer clear of doing this at all costs.
Yes, you can open a current account in two or more people’s names which makes it more convenient if you have shared bills. It’s important that you trust the other joint account holders as they’ll have access to your money and could affect your credit rating.
Some bank accounts will require you to deposit a set amount each month, as well as having a set number of direct debits. This could be the case if you’ve chosen an account with an attractive interest rate.
You can open a children’s bank account when your child turns 11. They’ll be given a debit card to withdraw money and shop online or in stores.
Often there’ll be a current account option for ages 11-16 and a more grown-up version for 16-18 year olds.