Current Accounts

These accounts are offered by banks and building societies with high street branches across the country. Standard features usually include a cashpoint/debit card, overdraft facilities and monthly paper statements. It's likely you'll also be able to manage your account by telephone and Internet too.

In theory you should benefit from a reasonable level of face to face service with branch staff, when needed. Sadly, in practice these staff are often under pressure to meet sales targets so there's a risk they'll be more focussed on selling you a product or service rather than act in your best interests.

Tend to be run by low cost operations who aim to pass on some of the savings to customers via competitive interest rates. You can expect a cashpoint/debit card and most allow you to pay in cash/cheques via the Post Office and/or certain bank branches. Cheque books and paper statements tend to be less standard, with some accounts paying you a lower rate of interest if you want such 'luxuries'. If you have problems, you'll need to deal with these via a call centre or the Internet, which could be a frustrating experience.

These accounts, which typically have words such as 'premier' or 'gold' in their names, target higher earners. In exchange for a monthly fee they (claim to) offer enhanced levels of personal service and often bolt-on 'extras' such as travel insurance, identity theft cover, mobile phone protection and discount vouchers. Some offer financial advice as part of the package but don't be fooled that this is necessarily a benefit, it's usually just an excuse for the bank to make more money by selling you other financial products.

Rates of interest are seldom very competitive, although they might offer a small improvement over a standard branch account. As for the 'extras', carefully establish their true worth to you so you can decide whether the monthly fee is worthwhile.

This is old school banking for the seriously rich. You'll likely have a personal banker who'll cater to your every whim, although given the fees you pay are probably putting his/her children through school perhaps that's not surprising!

In the past pretty much all current accounts paid the same rate of interest - zilch! Thankfully increased competition has seen matters improve, with many accounts now paying at least a little interest. The bottom line is that if you consistently have more than a few hundred pounds in your current account you should probably open a savings account paying a decent rate of interest and deposit your surplus cash there.

Some current accounts pay a high headline rate of interest, but this is usually capped at a modest level, such as balances of £2,500 or less. This is better than nothing, but it's still generally a bad idea to treat your current account as a savings account.

Overdrafts are effectively temporary loans that kick in should the balance on your current account fall below zero. There's usually an overdraft limit of between £100 - £500 and rates of interest (i.e. the cost of borrowing) can be high, as can additional fees if your account falls into overdraft (especially if you haven't agreed the overdraft with your bank beforehand). There are some accounts that offer interest free and/or no fee overdrafts, if you regularly fall into overdraft these can be well worth searching out.

Use our Overdraft Interest to work out how much an overdraft might cost you.

Debit cards are a modern day replacement for the cheque, allowing you to spend money day to day from your current account. Unlike credit cards, the cash is taken from your account more or less straight away, so can't spend what you don't have (unless you push your account into overdraft).

The introduction of 'chip and pin' cards in late 2003 did away with the need for a signature when using a debit card, by requiring customers to instead enter a four digit Personal Identification Number (PIN).

Some accounts allow you hold money in another currency, e.g. US Dollars or Euros. This might be useful if you spend a lot of time in another country or frequently need to send or receive payments in foreign currencies.

Cheque books are rapidly becoming a white elephant thanks to the success of debit cards and ability to send money to others via the Internet. A cheque is a piece of paper that you fill out and sign, giving your bank permission to transfer money from your account into the account of the person that you wrote the cheque to.

While still useful, expect cheques to become increasingly rare and probably extinct within the next twenty years.

The 'hole in the wall' has revolutionised the way we withdraw cash from current accounts. However, while a cashpoint card can prove invaluable, be careful you're not charged an arm and a leg for getting hold of your own money. While most banks and building societies no longer charge rival banks' customers for using their machines, 'convenience' cash machines in motorway service stations and pubs etc. often levy extortionate fees of up to £2 or more.

If you use a machine abroad with your UK cashpoint card then expect to pay a 'foreign exchange load' of around 2.75% and an additional 2%-3% cash withdrawal fee.

Direct debits provide a simple way of making regular payments from your current account. These are typically used to pay monthly bills such as telephone, gas and electricity etc. Because direct debits are set up to take money from your current account on a certain day each month it's important to keep track so you know how much is leaving your account and when. Bad planning could tip your account into overdraft and end up costing you interest and/or fees.

Banks and building societies usually court students in the hope they can nab a profitable customer for life. This is why they're happy to dangle some seemingly tempting deals (e.g. cashbacks, vouchers, interest-free overdrafts etc.) to attract student customers.

As ever, taking advantage of attractive offers is fine but don't hesitate to switch elsewhere once the deal starts to look poor value.

Bankers' Automated Clearing Service.

BACS allows you to send money, usually free of charge, from one UK bank account directly to another. It normally takes three working days for the money to clear. On the first day the transaction is entered onto the system, it's processed on the second day and cleared on the third.

Originally introduced in the late 1960s, the service has evolved over the years and is the most common method of transferring money between bank accounts in the UK, although is being superseded to some extent, by the newer Faster Payments Service (FPS).

Faster Payments Service.

FPS allows you to send money, normally clearing the same day and free of charge, from one UK bank account to another.

Introduced on 27 May 2008, the service is still in its infancy. Not all banks have signed up and those that have limit how much you can send (varies between banks, from around £100 to £10,000).

Clearing House Automated Payment System.

CHAPS allows you to send money, normally same day, from one UK or European bank account to another. There's usually a charge of around £20 - £30, not all European bank accounts are covered.

The system was introduced in 1984.

Society for Worldwide Interbank Financial Telecommunication.

SWIFT allows you to send money between most bank accounts worldwide. There's usually a charge of around £20 - £30 by the sending bank and the receiving bank may levy a fee too. Money can take four to six days or more to clear, depending on the countries involved.

Introduced in 1973, the service is now used by around 9,000 financial institutions in over 900 countries. To send money you'll need the SWIFT/BIC code of the bank you're sending the money too along with the International Bank Account Number (IBAN) of the person receiving the money.