How to choose a bank account – The Money Advice Service



The Money Advice Service helps people manage their money. We do this directly through our own free and impartial advice service. We also work in partnership with other organisations to help people make the most of their money. We are an independent service, set up by government.
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TRANSCRIPT:

How to choose a bank account

If you’re looking for a bank account – either because you want a new one or because you’re thinking of switching – it can all seem very overwhelming.

Before you look at what the banks and building societies are offering, it’s best to start by thinking about why you need a bank account.

Perhaps you need an account to have your wages or benefits paid into. And you might want to set up Direct Debits or standing orders to pay your household bills.

You probably want to be able to take money out of cash machines, and pay for things with a debit card.
So, having decided on the things you need, now’s the time to look at the types of bank account that are available and work out which one is best for you.

Current accounts are good for managing your day-to-day money. Your wages or benefits can be paid straight in. You can set up Direct Debits and standing orders for paying bills. You get a debit card that also lets you take money out of a cashpoint. And you usually get a cheque book too.

Most current accounts allow you to go overdrawn – so you’ll have to pass a credit check when you apply for one. If you do go into the red, it’s likely that you’ll pay fees and interest. And if there’s not enough in your account to cover a Direct Debit or a standing order, you’ll probably have to pay extra charges.

Basic bank accounts give you most of the same things as a current account. Your wages or benefits can be paid straight in. You can set up Direct Debits and standing orders, and you’ll normally get a debit card that also lets you take money out of a cashpoint.

The main difference is they don’t let you go overdrawn, so there’s no credit check to pass and no overdraft fees or interest to pay. But they normally do still have charges for refused Direct Debits and standing orders.

Jam jar accounts – also known as budgeting or rent accounts – are not as common as basic bank accounts but are growing in popularity. They let you receive wages and benefit payments, set up Direct Debits and standing orders, and you’ll normally get a card for using at cashpoint machines or a prepaid card.

They let you divide your account into different ‘jars’ so that you can keep your spending money separate from money for bills or rent.

You can’t go overdrawn so there’s no credit check to pass, and no fees or interest to pay. And they don’t charge you for refused Direct Debits or standing orders. However, they do normally charge a monthly fee.

So, hopefully now you know which type of account would be best for you. It’s time to shop around. One way to do this is to use the Money Advice Service comparison table to check out what each account can offer.

Don’t forget to look at credit unions too. These are ‘not-for-profit’ organisations that offer savings accounts and loans to their members. Some of them also offer current accounts and jam jar accounts.

For more about how to open the account you’ve chosen and how to pay bills out of your account, watch our other videos and go to our website.

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