There is a dizzying range of bank accounts out there so before you dive into the market take a minute and look through some of the options that are available to you. It’ll make your ultimate choice a whole lot easier.
Are you thinking about getting a new bank account? Do a little research on the choices that area available out there and things might start getting a little confusing. Sure, there are plenty of low maintenance, no-frills accounts which may seem easy and convenient but the easy choice is not necessarily the best.
To help you negotiate the sometimes tricky world of banking and personal finance we’ve put together this guide to the accounts which you’ll find out there. Starting with the basic, all the way up to some of the most exclusive options you can get.
The main types of account
Although there are many types of bank accounts out there, we’re going to simplify things by drawing a rough boundary between two main types: current and savings accounts. Broadly speaking current accounts are for your day-to-day transactions while savings are higher interest where you may wish to deposit money over a longer term.
OK, that is a very simple view but don’t get used to it – things get a little more complicated now.
It’s true that savings accounts have not had the best press recently but they remain an important money management option for many people. In times when investments may seem like an unsafe and over-complicated option, savings accounts offer a good level of security. Here are the four main types:
- Instant access
- These accounts typically have smaller interest rates but they are perfect if you think you’ll need quick access to your money for any reason. Some accounts of this type even come with a cash card which allows you to withdraw money from cash machines.
- Notice accounts
An account of this type will typically give you a better rate on the proviso that if you want to withdraw funds you’ll need to give a period of notice – for example 90 days. They require a degree of security and forward planning because although you’ll be able to access the money immediately if you need to, the resulting penalties may wipe out your interest gains.
This government endorsed system allows you to earn a prescribed level of cash free savings each year. They often come with high interest rates but the amount put into them each year is legally restricted.
This choice is for regular savers who want a simple account for paying into on a monthly basis. You will often find that you will get accounts with better interest rates if you link this type of account with your current account.
You’ll most likely be using this type of day-to-day account more than any other kind so it’s a real surprise that people seem so unwilling to change their bank accounts. While the reasons behind this are complicated the fact is that you should at least consider getting the right account for you – and that means being informed as to what is out there.
At a time when the government is calling for more competition in banking, this is as good a time as ever to find the right account so here’s a quick overview of the main types:
- Basic cash account: These are the simplest accounts out there – the no-frills option. With this choice you won’t get a chequebook or overdraft facility and you’re unlikely to get internet banking either – although in many cases this is changing. On the positive side these accounts are generally free and very easy to manage.
- Standard current account: The next step up, these accounts will generally have a number of benefits attached including chequebooks, debit cards, overdraft facilities and telephone or online banking facilities. They are usually free, although that has been disputed in the media.
- Account with extras: These accounts often carry a monthly fee and may require that you pay a certain amount into them each month to qualify. In exchange for these conditions you can expect to receive a range of perks such as travel insurance, roadside assistance and discounts on other services. If you are tempted by such an account check the terms thoroughly and try to gauge if you’ll use the perks – if so this account could be good value.
- Other account types: You’ll find that there are also several niche accounts offered to many different circumstances. Students, children, especially high earners… they all have options available to them. There are even ranges of accounts available which can help make sure religious people keep their personal finance arrangements in line with their faith. Look around and you should be able to find something that fits your requirements.
As if the bank account options themselves weren’t complex enough, there is another layer to consider. Just as there are different types of account, there are also different types of bank. We’ll all be familiar with the big high street banks but there are many others, including more exclusive operations which offer high-end private banking services.
In addition to these types if you’ll look around you’ll find there are many other banks out there – from ethical banks to internet-focussed financial institutions. Before you decide on getting on board with any of them make sure you do your research and are comfortable with your choice.
Are you looking to switch banks?
Catherine Halsey is a keen blogger who writes about a broad range of topics including finance and banking.