Bank accounts
Types of bank account
There are two types of bank account for managing everyday money:
a basic bank account and a current account. Banks also offer a
range of accounts designed for medium or longer-term
savings. Savings or term accounts usually pay more interest
than basic and current accounts.
Basic bank accounts
Basic bank accounts offer a convenient place to keep money you
need for everyday use. You can arrange to have wages, benefits
or tax credits paid into one. You can also pay in cheques or cash
free of charge and set up direct debits, which pay regular bills
automatically from your account.
With a basic bank account you get a cash card which you can use
at a cash machine to withdraw money. Some also offer a debit card that you can use to pay for
items and to get cashback in shops but with a basic account
these will only work if there's enough money in your account.
You don't get a cheque book with a basic bank account and you
can't take out more money than is in the account (create
an overdraft). For this reason, basic bank accounts are useful
for anyone worried about overspending.
The Financial Services Authority (FSA) gives information on how
to find a basic bank account (www.moneymadeclear.fsa.gov.uk/products/bank_accounts/bank_accounts_getting_help.html).
Current accounts
Current accounts have more features than basic bank accounts.
For example, they usually offer:
-
a cheque book;
-
a cheque guarantee card, which makes cheques more widely
acceptable;
-
a debit card (some allow payments without checking your
account);
-
direct debits;
-
standing orders (regular set payments from your account to
someone of your choice);
-
BACS (Bank Automated Clearing Service) - the facility to accept
payments directly into your account (for example from your
employer) or for you to make one-off payments to someone else out
of the account;
-
overdraft facility - the bank may allow you to go overdrawn up
to a certain amount but you need to arrange this in advance and
charges apply (you pay extra charges if you go overdrawn without an
agreement).
Some current accounts pay interest on money you leave in the
account but the rate is usually low.
You can compare basic, current and savings account features on
the FSA website (www.moneymadeclear.fsa.gov.uk/products/bank_accounts/types_of_bank_account.html).
Bank accounts and your rights
The FSA ensures that banks and building societies are
financially sound. You may be at least partially protected through
the Financial Services Compensation Scheme if your bank
collapses.
If you want to make a complaint, banks and building societies
must help by having internal procedures and belonging to the
Financial Ombudsman Service (an impartial service that can help
settle disputes).
Most banks and building societies follow the voluntary Banking
Code. This sets standards of good banking practice for the industry
when dealing with personal customers.