Banks and building societies generally offer customers in the UK two different types of accounts: current accounts and savings accounts. However, not a lot is mentioned on what would be the right one for you, as well as the differences between the two.
This guide aims to correct that problem straightaway.
You see, it’s all about how you will actually use your new account. Each type of account will offer different benefits as well as different restrictions that must be followed. How you manage your money is going to be very important in many ways, so you want to make sure that you actually take care of things carefully.
The difference is simple: a current account is probably what you’re looking for when you want to manage day to day transactions. You will be able to set up automatic payments, including standing orders and direct debits. You also will be able to issue checks and use a debit card that can be used to withdraw cash as well as pay for goods and services. It’s completely up to you how to handle your money. Some people like overdraft protection and check guarantee benefits on their current accounts, which means that they don’t have to face the risk of a payment not going through as planned.
There are also package current accounts, which offer some neat features such as mobile phone insurance and breakdown cover in return for a small fee.
Compare that with savings accounts, that actually pay you some interest on your money. There are a lot of different accounts under this umbrella, including Cash ISAs and fixed term bonds. You can get a nice interest rate for a while, usually through a bonus interest rate.
Current accounts let you access your money a lot more than savings accounts do, but they don’t pay much interest — if they actually do pay any interest at all. You just need to look into what you want to do for the long run.
Current accounts are starting to offer interest rates, as banks have realized that people really want to have their money in one place and still see their money grow.
If you’re still not sure where to turn, you want to go back to the numbers. Make sure that you look at the interest rate, as well as how much money needs to be in the account in order to earn that interest rate. You will usually be required to keep a certain amount in the account in order to actually keep the account earning interest.
Don’t forget to really look at the fine print before you sign anything. The terms and conditions are what you will need to look at carefully. Don’t feel pressured just because the account might be part of a promotion going on at the bank. There will always be another promotion. However, if you don’t play it carefully with your money, you might be parted from it sooner than you think.
That’s why it’s so absolutely critical to make sure that you focus on the bigger picture and get your questions answered while you’re at the bank. Then you will need to take all of the information in mind to make your decision.
There’s no question on the importance of having a bank account — you just need to make sure you figure out exactly which one to get, and what terms and conditions go with it!