Current accounts enable us to manage our day-to-day finances, but many now offer much more too.
What are current accounts?
Current accounts are the most common type of bank account in the UK and are essential to most people’s personal finance arrangements. Although they are all different in terms of charges and features, they all offer some basic advantages and functionality.
Historically, a current account's primary benefit was that it enabled a holder to store their money in a safe environment, away from the danger of theft or damage. Today they still offer that same protection (if not more so, since the introduction of the FSCS), but they also give us the tools and functionality (like debit cards, Direct Debit, Standing Orders etc) that form the infrastructure which enables us to seamlessly transact and automate our personal finances.
What features do current accounts offer?
Most current accounts offer a breadth of tools and services, like a chequebook, a debit card, Direct Debit and Standing Order functionality, BACS payments (Bankers Automated Clearing Service - for payments in and out of your account), and overdraft facilities (subject to your status/credit score). Some current accounts also pay high levels of interest on balances, albeit these interest payments are typically capped to a certain balance level.
There are also packaged current accounts that offer additional extras, such as travel insurance, mobile insurance and car breakdown cover, for a monthly fee. All packaged accounts offer different benefits and functionality, but some can save people a considerable amount if all the benefits are elements they would normally purchase anyway (e.g. mobile phone insurance, travel insurance etc). Please visit our packaged current account comparison table to identify the best offers available for you.
Who can get a current account?
The minimum age required to open a current account is 16 years old, although most banks have raised that to 18 years old. You might be able to open a current account if you are below the age of 18 with the help of your parents (or guardian).
Some current accounts require that a minimum amount be paid into the account on a monthly basis (salary, benefits, pension etc). What you then do with the money is up to you, but it must go into the bank to start with.
Often current account providers will require that an individual is 'creditworthy' before they are offered an account. Individuals who have a poor credit score should look to basic bank account options for their banking needs – although they are unlikely to get an overdraft with these products.
How do I apply for a current account?
The process of applying for a current account is very similar to that of applying for many financial products. Usually, the application consists of a form that you need to fill in along with some paperwork for proof of identification and address.
Most accounts offer you the option to open it either alone or with somebody else (a joint account) - keep in mind that if you open a joint account you will be linked financially with that person and you are going to be co-scored.
What does it cost to have a current account?
Most current accounts don't charge you for account services, as long as there is money in the account. However, if you have opted for a packaged current account then you have to pay the monthly fee.
It is important to note that although no other charges or fees are associated with maintaining a current account, there are some types of transactions that will incur additional fees; for example your bank might charge you if a Direct Debit was returned due to insufficient funds, or an overdraft fee might be charged if you spend more than your balance. In order to find out all the charges and fees you might incur, see the terms and conditions of your bank.
Can you switch your current account while in your overdraft?
The short answer is yes. It is generally assumed that if your current account is in the red then you are tied to your bank and unable to switch. Because you are in your overdraft you won’t necessarily have numerous choices as to whom you can switch to, but if you have a reasonable credit history and a good history of overdraft repayment and management (i.e. having stayed within your limits) you will have options.
How is the overdraft balance cleared?
You will need to settle any outstanding balance (debt) with the organisation you hold your old account with before the account can be closed. This is handled by your new bank as part of the switching process. Supposing you have been deemed eligible to switch under your new bank's criteria and they have agreed to shift your overdraft debt to your new bank account, then your new bank will make the payment to the old account (similar to balance transfer) to assume responsibility for your debt.
This will happen on the last day of the switching process and effectively confirms the switch. Once the transaction has taken place, your old account is closed and your overdraft is active on your new account, meaning the account is officially open.
Be sure to read all print associated with your account. Ensure you are aware of any charges and fees that a switch may incur, as well as comparing interest rates to get the best deal. You should, however, acknowledge that overdrafts are supposed to be used for short-term borrowing and tend to have interest rates which reflect this.