Everyday Banking

Introduction to current accounts

There are a number of different types of current account available:

• Basic bank accounts- offer cash only and no overdraft or cheque book
• Youth accounts (for people under 18)
• Standard current account, offers a full range of payment methods including debit card and cheque book.
• Student accounts and graduate accounts
• Interest paid when in credit 
• Joint account
• Packaged accounts, charge a fee for offering additional services such as travel insurance.
• Premium accounts (for wealthy customers)

People use current accounts to make and receive payments by electronic transfer, standing order and cheque. Payments out of an account are recorded on bank statements as debits, while payments into an account are called credits. These include direct debits, which are used by organisations to make electronic payments of salaries, pensions, state benefits and tax credits into current accounts.

1. Basic Bank Accounts

• Basic accounts suit people who wish to avoid borrowing, e.g those on low incomes, people who have never had an account before etc.
• Customers cannot get into debt- no debit card, no overdraft, no cheque book
• Mostly free of charge (may be exceptions for fraudsters or bankruptees)
• Operated using cash cards or pre-paid cards
• Most offer direct debits and standing orders to pay bills 
• Basic bank accounts were introduced in 2004 as part of the government's plans for financial inclusion.

2. Youth Accounts 

• Available for people aged under 18
• No overdraft facility 
• Accounts for people aged 11-15 often offer cash cards or debit cards.
• Accounts for people aged 16-19 age group may offer cash cards, debit cards, standing orders and direct debits, a chequebook, online banking, mobile banking, text alerts

3. Standard Current Accounts

• Standard current accounts offer the full range of current account facilities e.g receiving payments, a cash card or debit card, overdraft, standing orders, direct debit, chequebook, online banking, mobile banking, text alerts.
• Usually free of charge unless using the overdraft facility (or other services that incur a charge)
• 67% of the current accounts used in the UK are standard accounts.

4. Student and graduate accounts

• This is a variation on the standard current account, tailored to the needs of students i.e higher education and recent graduates
• Low or no interest overdraft facility
• Incentives e.g discounts on contents or travel insurance
• Once students graduate, they need to switch to a graduate or standard current account.

5. Interest paid when in credit

• Some current accounts pay interest on credit balances (amount of money you have in a current account)
• Interest is paid on balances between a certain minimum and maximum amounts
• Usually, have conditions, such as paying in a minimum monthly amount or keeping the account in credit.
• May be fees for holding the account.
• There is an example from Sept 2018 - "Nationwide Flexdirect, 5% interest on £2,500 fixed but only for…