How to Pick the Best Current Account

There are many banks and building societies to choose form and most of them have current accounts. A current account is the account that we will use to put through standing orders and direct debit, tends to issue a debit card and cheque book and often has an overdraft facility. We therefore tend to have our salaries paid into them, pay our bills through them, withdraw cash from them and borrow money through them. As we do so much with them it is really important to make sure that the current account, we have is the best for us and our needs.

Costs

For most of us it is the costs of the account that are the biggest priority, but many of us will not compare the costs once we have set up an account. We might check it is the best when we open it but then not bother to keep checking to see whether it remains competitive. It can be a hassle swapping accounts, although it is easier than it used to be. The bank should help with switching over the direct debits and standing orders, for example. Some people might not think that they pay anything for their current account so costs are not relevant to them. However, some current accounts pay interest on a balance and so you could associate the cost of not having this benefit as something to consider. If you use the overdraft facility then the cost of this would need to be considered. If you have a current account that you pay a fee for, in exchange for things such as insurance, then it is worth checking to see whether you are getting a good deal with this.

Overdraft

The overdraft facility on an account can be a big factor for some people. Not only the cost of it but how much you are allowed to borrow. At the moment banks with often authorise an overdraft of a certain amount of money at a certain lending rate and then if you borrow more than that or take out an unauthorised overdraft they will charge more, perhaps a higher interest and a daily fee. These rates change between current accounts as does the amount of money that the lender will authorise you to borrow. However, as of April 2020 these rules are changing in the UK and there is no longer allowed to be a different charge for authorised and unauthorised overdrafts. This was thought to protect people against the very high unauthorised overdraft charges which were causing problems for people. In response, many banks have changed their overdraft rates and many seem to be about 40% AER meaning if you borrowed £100 for a year you would repay £140. This is often more than twice the amount that used to be charged for authorised overdrafts and so this is something to be really careful about.

Service provided

Current accounts provide different services for their customers. They will normally provide them with a debit card, cheque book, paying in book, and the ability to withdraw money from ATMs. However, they will vary and some will have limited ATM’s you can withdraw from or they will only issue a cash withdrawal card and not a debit card, or have limited paying in facilities with no branches or things like this. Some people prefer an account that does a bit more for them, perhaps pays interest on their money or gives them cashback when they buy certain things or give them free perks like insurance. These accounts tend to have a charge but as long as you can make back more money form the perks that the offer then they can be worth it. However, these types of accounts are likely to have higher overdraft costs. Make sure that you will get the services that you need.

Reputation of the bank

Some people will also want to use a bank that have a good reputation. We do sometimes hear about people being badly treated by banks and building societies and it makes us worry that we might be as well. This might mean that there are certain ones that we might decide that we want to avoid or that we would rather use. It can be worth thinking about what criteria we might want them to fulfil and looking to see if they do. We might find information on their website, in their branches or by getting in touch with their customer service department. We might also want to talk to family and friends or look at online reviews to see whether we think we might get on well with them. Do remember that just because one person has a bad experience it does not mean that you will but likewise the opposite also applies.

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