Your complete guide to current accounts

Current accounts come in all shapes and sizes, from those that pay interest to those that are designed for school children. But which is going to be right for you?

Bank accounts are a financial necessity for most of us, a place for our salary to be paid into and from which we can pay our various regular bills.

Unfortunately, many people don’t bother putting too much thought into which account they open, simply opting for a bog-standard account from a familiar name.

But the reality is that there are all sorts of terrific accounts that do different things, and picking the right one for you could give your finances a real boost.

Historically people in the UK have been pretty apathetic about the idea of switching bank accounts.

There are all sorts of reasons for this, but most commonly it’s down to account holders believing that it will be more hassle than it’s worth.

As a result, the Current Account Switch Service was launched back in 2013, with the intention of making the process much simpler ‒ and faster.

The Current Account Switch Service is free to use, and guarantees that your switch will take place within seven working days. 

Effectively it puts the two banks ‒ your old one and the one you’re switching to ‒ in charge of making sure that things move smoothly.

They are then responsible for switching your existing payments, like your water bill and mortgage repayments, as well as transferring your cash balance. The old bank will take care of closing your old bank account as well.

Not every bank is signed up to participate in these switches though, so it’s worth double-checking this before going ahead with a switch.

So why move your bank account?

Some current accounts pay interest on your in-credit balance.

As a result, staying out of your overdraft doesn’t just mean avoiding fees and charges ‒ it also gives your cash a chance to grow, thanks to the interest payments from your bank.

In fact, in recent years current accounts have emerged as something of a rival to the traditional savings account, offering qualifying account holders even more significant returns than you could get from an actual savings account.

It’s important to check the terms and conditions of these interest offers though.

Sometimes banks offer an eye-catching rate, but only for a set period, for example, 12 months. After that point, the rate drops down sharply.

Similarly, some banks limit the balances on which they will pay interest.

For example, you might enjoy an excellent rate of interest on only the first £2,000 in your account ‒ any money above that point may not generate any interest at all.

There may also be rules surrounding how you use the account, such as how many direct debits you have and how much you have to pay into the account each month.

We've taken a look at the current accounts paying the highest rates of interest here. 

At the other end of the scale, if you are the sort of person who occasionally dips into your overdraft, then you’re best off finding an account that won’t unduly punish you for doing so.

New regulations from the FCA have forced account providers to be much more up-front about what it will cost you if you drop into the red, with most charging interest at around 40%. Ouch.

However, there are accounts that offer interest-free overdrafts.

So you might be able to drop £250 or so into your overdraft every month without facing a charge for doing so.

Again, it’s important to check how long this facility is in place for ‒ while some accounts offer them for life, others limit the fee-free overdraft offer to just a few months. 

We've highlighted some of the accounts with the best overdraft offers for you here.

Monthly bills are a sad fact of life ‒ there’s no escaping paying for things like your Council Tax and water bill.

But there are bank accounts that make paying those bills a little less painful, by offering cashback on those direct debits.

This generally works as a percentage of the bill in question, so if the account pays 1% cashback on your Council Tax bill and you are paying £300 a month, then that’s £3 heading back to you.

That may not sound like much, but if you have a host of qualifying bill payments then over a year those cashback payments can really add up.

These accounts often charge a monthly fee, so it’s important to include that in your calculations to see how much you could possibly make from the cashback on offer.

There are also usually rules covering how much you need to pay into the account each month.

For more, check out our reviews of the best bank accounts for cashback here.

Recent years have seen the emergence of a host of app-based bank accounts, with one big selling point ‒ they are great for people to use overseas.

With a normal bank account, if you make a withdrawal abroad or use your card to buy something while on holiday, it’s a costly mistake as there are fees and charges thrown on top.

These can be flat fees too, rather than a percentage of your spend, meaning that each and every time you use your card the added costs mount up. 

However, there are now plenty of cards that allow you to spend and withdraw cash overseas without incurring these fees, meaning you can manage your money just as you would at home. 

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It’s not unusual for a bank account to have a few added extras for users to enjoy, but packaged accounts take this a step further.

These accounts offer users a bundle of extra services, which could range from travel insurance and breakdown cover to improved interest rates on your in-credit balances.

These extras don’t come for free though ‒ packaged accounts come with a monthly fee to consider.

Packaged accounts can work out as good value, if you use all ‒ or at least, most ‒ of the added features on offer.

But if you are only likely to use one or two of the features, then you may find that you’d be better off paying for that service separately and going with a normal, free bank account.

Check out our review of some of the best packaged accounts on the market here. 

Just moving to a new bank account can be a nice little earner too, thanks to some banks offering switching bonuses.

Essentially they will reward you with cold, hard cash just for giving their account a try ‒ a pretty compelling idea!

There will usually be certain terms you’ll need to abide by in order to get the cash, such as transferring using the Current Account Switch Service, having a minimum number of direct debits in place, and paying in a certain amount to the account each month. 

Also, you won’t tend to get the money immediately. Instead, the money will usually be paid a few months down the line.

We’ve highlighted some of the best bank accounts for switching bonuses here. 

Unfortunately significant numbers of Brits don’t have a bank account, in part due to issues with their credit score.

In a bid to help people in this position, providers have launched a host of basic bank accounts.

As the name suggests, these are no-frills accounts ‒ you won’t be getting cashback on your card use, for example.

They do however provide you with somewhere for your wages to be paid, and from which to pay your bills.

Basic accounts don’t usually require a credit check before you open one, though you may need to do a bit of hunting to find them from your chosen bank as they aren’t always particularly well advertised.

The idea is that once you show you can manage your money well, and your credit score improves, you can move onto a more attractive account.

A host of banks offer specialist accounts just for the nation’s students. 

As you can imagine, the big draw of these accounts is usually the overdraft. An awful lot of students end up in the red during their studies for all sorts of reasons, and so having a significant overdraft facility is hugely attractive.

It’s not unusual for student current accounts to offer a gradually increasing overdraft facility over the three years of a traditional course ‒ £500 in the first year, £1,000 in the second year and £1,500 in the third year, for example.

There’s more to a student account than just the overdraft though.

Account providers often throw in some added freebies to help support those studies, such as subscriptions to online library services or free railcards to help students with the cost of getting home at the holidays.

Here’s our look at the best student bank accounts around today.

Of course, your studies don’t last forever, and neither do student bank accounts. As a result, many banks offer dedicated graduate accounts to help with the transition from student to the working world.

Again, the big selling point is the overdraft given graduates often need to get their finances back into healthier shape, though these accounts may come with added extras too like cards offering money off at restaurants.

Some graduate accounts are only on offer to those who previously had a student account with that bank, while others can be switched to from rival banks.

Check out our guide to the top graduate current accounts.

Bank accounts aren’t just for adults either; there are some accounts designed for children which are available too.

These accounts are developed with children aged 11-18 in mind and come with certain basic features like the ability to make withdrawals from ATMs and to pay money into the account. Some pay interest on balances too.

There are some limits in place to protect children too, such as not allowing account holders to drop into an overdraft and run up any debt.

For more on the best children’s bank accounts, read this guide.

If you are running a business, then you may need to set up a dedicated business bank account to handle those finances.

Business bank accounts come in all sorts of different shapes and sizes.

Some offer little different from a normal bank account, but others come with features that can help with things like payroll and paying tax.

Importantly, you don’t HAVE to open a business bank account if you’re a sole trader or freelancing. But if you have set up a separate limited company, then you will need a proper business bank account. 

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