Current acccount

Current accounts are sometimes known as cheque accounts. They have more features than basic bank accounts (see below). For example, they usually offer:

• cheque book
• cheque guarantee card (acts as a 'guarantee' so makes cheques more widely acceptable)
• debit card (some allow payments without checking your account)
• direct debits (automatic bill payments direct from your account)
• standing orders (regular set payments from your account to someone of your choice)
• BACS (Bankers' automated clearing service) - the facility to accept payments directly into your account (eg from your employer), or for you to make one-off payments to someone else out of the account
• overdraft facility - the bank may allow you to go overdrawn up to a certain amount; but you need to arrange this in advance and charges apply (you pay extra charges if you go overdrawn without an agreement)
• Some current accounts pay interest on money you leave in the account, but the rate is usually low.
  

Packaged account

Packaged accounts charge you a fee of anything between £2 and £25 a month, and as well as current account banking they offer you perks ranging from “free” travel insurance and AA membership to discounts on the bank’s mortgage rates. They will also usually offer you some sort of discounted overdraft deal and a personal relationship manager - but not always.

If you are considering signing up for a packaged account make sure that you will use the perks you will be granted. A recent survey found that:

• Half of customers have worldwide travel insurance as part of their packaged account deal, but only a third have ever used it  
• Around a quarter of packaged accounts have retailer discounts on offer, but only 6% have ever used them
• And although a fifth of customers think they have a 24-hour legal helpline on offer, only 4% have chosen to, or been in a position to, use it
• Additionally, the value placed on some of the perks could be overestimated. For instance, insurance such as travel cover can often be found elsewhere at a cost less than half the “value” placed on it by the bank.

Finally, packaged accounts also give the banks an opportunity to sell further products to their customer – a tactic known as “cross-selling”. This means that customers can be encouraged to buy other products from the bank for a further fee, sometimes with a supposed discount. However, these products may also not be the best value compared with what else is available in the market, even with the discount.

Alarmingly, research from data supplier uSwitch found that 1.3 million people did not actually choose to have a packaged account, but had been “automatically upgraded” by their bank – something the banks deny. For over a third (34%) of packaged current account customers, the only reason they have one is because their bank talked them into it.

You may benefit from a packaged account, but don't sign up for one before you do some basic maths to ensure that you do, and are not paying for a service you could obtain free.

 Basic Bank Account

A Basic Bank Account allows you to receive money and pay bills. However, this kind of account does not allow you to go overdrawn by more than £10, if at all. A Basic Bank Account can be the first step towards opening a regular current account at a later date. Almost everyone should be able to open this kind of account. The bank or building society may want to check your credit history to see if any County Court Judgements (CCJs) have been made against you, or if you have been made bankrupt. Even if you have, you may still be able to open an account.

A Basic Bank Account allows you to:

• Have wages, benefits, pension or tax credits paid directly into the account
• Pay in cheques
• Take money out at cash machines with a cash card
• Withdraw money at the Post Office
• Pay bills by Direct Debit, and
• Some banks will also allow you to pay by standing order.

In order to open a Basic Bank Account, you will need to prove your identity to the bank or building society. Documentation required will be a passport or photo-card driving licence or combination of certain official documents, such as an old-style UK driving licence plus a council tax bill. If you do not have any of these there is other documentation that can be used, such as:

• A letter from a government department or local authority confirming your right to state benefits
• A letter from a care home manager or warden of sheltered accommodation or refuge
• Confirmation from a young person’s workplace or educational institute.

The Financial Services Authority has a leaflet on Basic Bank Accounts. This can be viewed on their website here http://www.moneymadeclear.fsa.gov.uk/ or by calling their Consumer Helpline on 0845 606 1234.

Types of Bank Account

CashQuestions Guide to Choosing an Account

CashQuestions Guide to Switching your Bank Account

CashQuestions Guide to Banking Online

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