Finding the Best Current Account for You

• Guides
• Published: 16 Oct 2008 in Money and Current Accounts

The days are probably long gone when you’d pick a bank account (probably the same bank your father used) when you first started work and stuck to it for the rest of your life. Keen competition amongst banks now means that there’s a constant range of offers and incentives to encourage you to switch accounts and get more for your money. What’s more, as your personal circumstances change (and everyone’s do), there’s that added incentive of switching to a new account that offers just what you want when you most need it.

To find the best current bank account for you, therefore, it’s important first of all to determine what kind of current account user you happen to be at the time. For our purposes here, it’s not such a difficult picture to paint – your current account is always in credit; it’s hardly ever out of the red; or it’s a mixture of the two.

Always in credit

If your account is always in credit and you never draw anything at all against any agreed credit or overdraft facility, then the only factor you really need care about is the interest the bank pays you on your positive balance.

Some banks will offer you a sign-up bonus when you first open an account and others offer very attractive rates of interest (at the time of writing, some go up to 8%) on credit balances. The only problem with these is that they are often available only to reasonably higher earners (of say more than £24,000 a year) and also require a minimum amount (i.e. your salary) to be paid in each month.

Although low earners (below £7,000 let’s say) can find some reasonably attractive positive balance interest rates, where the banks do not require a minimum monthly pay-in, they will nevertheless probably insist on a good credit score in order to open the account. For those on a low income, that is often not possible.

Hardly ever out of the red

You’ll already know that if your bank account is almost permanently overdrawn, the best you can hope for is a bank that doesn’t charge over the top for that overdraft. It really is a question of looking for the lowest rate on your overdraft.

A bit of both

For very many people, their current account will be in credit for part of the month, after they’ve been paid, and gradually veer towards and then over into the red before the next pay cheque. If this is you, then it’s important to remember that the cost of that part of the month when you’re overdrawn is much bigger than the reward you get for being in credit. So, try to keep the period of borrowing to as short a time as possible – perhaps arranging all your direct debits and standing orders for utility bills and the like towards the end of your monthly pay cycle.

Special cases

If you’re a student or a recent graduate, you’ll find that almost all the banks will be offering better, preferential rates than those offered normally. They may also give you incentives such as vouchers or cash in your account. The idea behind this is that they’ll get your business and then have you a loyal customer forever! (It has been proven that the majority of people do fail to switch bank accounts purely because of the perceived hassle involved, even if it means putting up with rubbish service!)

Rejected for a current account?

If, on the other hand, your application to open a current account has been rejected by a bank – because of your low earnings or poor credit record, for example – don’t give up trying and persist in finding one that will perhaps accommodate your needs with a Basic Bank Account.

Specially designed for those people who have experienced financial difficulty in the past or have limited ID, unless you ask for them specifically, it is unlikely a bank will offer one of these accounts to you as it costs them money.

Read the Financial Services Authority has Guide to Basic Bank Accounts for more information.

In summary, the right current bank account for you is the one that best suits your needs, according to whether:

• Your account is always in credit
• Hardly ever out of the red; or
• A bit of both; or
• If you are a student or recent graduate; or
• If your application for an account has previously been rejected.