Current Accounts Intro

Accounts are generally split in to two types – either current accounts or savings accounts. A current account is the account you use from day to day. You normally use this account when you take cash out of cash machines, and pay for purchases with a debit card, and if this is normally where your salary would be paid into.

You may also setup the paying of bills using standing orders or direct debits with this account. A standing order is a payment that remains the same amount, whereas a direct debit can change the amount that is paid for each payment.

Most current accounts also offer you overdraft facilities, so that if you run out of money before your wages are paid in, you can borrow easily from the bank by letting your account balance go negative. The interest rate the bank will charge you for this borrowing though is normally significantly higher than the rate they pay you when your account is in credit. If you think you will make heavy use of an overdraft, then the interest rate on the overdraft is probably more important to look at than the interest rate they pay you.

Many people have their current account with a bank, because this is the account they opened when they were in their teens, and they have just carried on using it. It is wise to shop around though for a current account, as you can get up to 50 times the 0.1% interest that most banks pay when your account is in credit. Alliance and Leicester currently have a current account paying 5.0% interest, as well as having a 0% interest overdraft till October 2005.

It is also worth looking at whether you can access your account online – having instant 24hr access to your account is much better than being restricted to running up to the local branch in your lunch hour, or phoning them when you get chance and having to wait in a queue.

If you decide that your existing current account isn’t offering enough, what should you look at when finding a new account? The list below shows some of the points you should consider:

• The interest rate the account will pay.
• The overdraft rate if you think you will use this more than occasionally.
• Do you want to be able to pop into a local branch easily?
• And do you want to be able to run your account over the internet?
• Are there any charges payable on the account?
• Do you prefer to have a paper copy of a statement every month?
• If you are moving a ‘busy’ account, do they offer to move standing orders, direct debits and even the payment of your salary to your new account for you?