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What is a current account?
A current account is a bank or building society account that lets you manage your spending on a day-to-day basis. You can have your salary paid into it as well as set up Direct Debits and standing orders from it. Some current accounts pay interest on balances, give you cashback on spending and offer an overdraft facility.
What types of current accounts are there?
Finding the best current account for you will depend on your financial situation and how you plan to use the account. We’ve listed the different types of current accounts to help you make the best choice.
Standard current accounts
Standard current accounts provide many useful services. You can have your salary paid directly into it, pay bills or set up Direct Debits. You’re usually given a debit card that lets you make cash withdrawals and pay for goods. When comparing current accounts, consider interest rates, overdraft limits, cashback opportunities, rewards and monthly fees.
Packaged accounts
These are aimed at customers looking for additional extras. These might include travel insurance, mobile phone insurance, breakdown cover or cashback. This type of account often comes with a monthly or annual fee, so you’ll need to make sure this works for you.
Student bank accounts
The best student bank accounts aim to meet the needs of those studying at college or university and typically offer interest-free overdrafts. This gives you flexibility and makes it easier to pay off any debt. It also saves you from accumulating compound interest.
Graduate bank accounts
The best graduate bank accounts are designed to help graduates pay off overdrafts built up at university. Many offer interest-free overdrafts for up to three years, along with exclusive deals on holidays, events and insurance, for instance. Some accounts charge monthly fees, so watch out for these when you compare accounts.
Basic bank accounts
Basic bank accounts are available to anyone. They tend to suit people who don’t qualify for a standard account, perhaps because they have a low credit score or only recently moved to the UK.
Joint accounts
Joint accounts work like any other current account, only both of you are responsible for income and outgoings. They’re popular with couples who have shared financial responsibilities, such as a mortgage, rent or bills. You may find the number of account holders is limited to two. When researching accounts, check for the same benefits you’d expect from individual accounts, such as cashback and rewards, as well as high interest rates.
Cashback current accounts
Cashback current accounts offer cashback on certain monthly bills, such as your mortgage or utility bills. These accounts charge a monthly fee but can help boost your income if you choose wisely. Comparing cashback benefits is the best way to find the right deal for you.
Reward accounts
These can include benefits like travel or home insurance, railcards and other discounts. These accounts normally charge a monthly fee, so make sure the rewards are worth it.
Bank accounts with overdrafts
These are ideal for students but are available to anyone over 18. Most bank accounts (except basic bank accounts) offer an overdraft facility, which can be useful for short-term emergencies, but avoid using your overdraft as a long-term solution. Some accounts come with interest-free limits, allowing you to effectively borrow a certain amount without paying interest, while others charge varying interest rates, depending on how overdrawn you are. If you’re overdrawn, the best accounts are those with interest-free limits.
What should I consider before comparing current accounts?
Think about how you plan to use your current account. Consider your cashflow – how much do you intend to pay in and withdraw each month? Do you need an arranged overdraft? Are you moving money often? Considering factors like this can help you narrow down your options and find a current account that suits your lifestyle.
Once you’ve decided which type of current account is best for you, here’s what you need to consider:
- Interest rates
- Overdraft (including limits and interest rates)
- Cashback
- Rewards and other benefits
- Monthly account fees
- Contactless payments
- Mobile and online banking access.
Everyone’s financial situation is different, so the best current account for someone else might not work for you. By comparing accounts with Compare the Market, we hope you can find the right fit.
Online banking and mobile banking
The best current accounts give you the flexibility and ease of online and mobile banking. This lets you control your money using your phone or any connected device. Online and mobile banking allows you to:
- Check your balance
- Pay bills
- Set up Direct Debits
- Transfer money
- Connect to your mortgage or other loans
- Authorise digital payments
- Set up spending limits
- Freeze your account.
How to switch a current account online
Decided to switch current account? Once you’ve chosen the type of account you’d like to move to, the process is pretty simple:
Compare current account deals
Choose the type of account you’re looking for and we’ll show you a range of options. You can compare interest rates, overdraft limits, account benefits and more, to help you find the best current account for you.
Complete the application
Once you’ve found the right offer, click through to your new provider and apply – it should only take a few minutes.
Organise the switch
Under the Current Account Switch Service, most providers will handle this for you. They’ll transfer your money and any Direct Debits to your new bank, tell your employer to switch your salary payment and close your old account. Do check this with your new bank though – if it isn’t part of the switch scheme, you may be responsible for some of the process.
When you open any bank account, you’ll need to give your new provider certain information, like ID and proof of address. Your new bank is also likely to carry out a credit check on you.
How long does it take to switch a current account?
If your new bank is part of the Current Account Switch Guarantee service, your switch can take as little as seven working days. You can also pick the date you’d like the switch to take place. If your new bank isn’t part of the switch service, expect it to take up to 10 working days.
With the Current Account Switch Guarantee, your new account provider should transfer all your Direct Debits, as well as your salary payment, to your new account.
Current accounts and your credit score
When you open certain current accounts, you’ll need to undergo a credit check. This is because some current accounts offer an overdraft feature, which is a type of credit product. Your credit score and credit history will affect your chances of approval. If you have a bad credit score or poor credit history, there are bank accounts for bad credit you can look into. These might include a basic bank account, which won’t give you an overdraft so doesn’t involve a credit check.
Paying Direct Debits on time could improve your credit score over time. But, if you use your overdraft or fail to pay it off, your credit score will be negatively impacted.
What benefits can I get by switching current accounts?
The current accounts market is extremely competitive, with new accounts offered all the time to attract customers. Certain types of accounts offer benefits and rewards, such as better interest rates, cashback, travel insurance or breakdown cover. That’s why it’s worth shopping around for the best current accounts available.
Be aware, when you switch current accounts to receive rewards, you might be required to pay in a certain amount each month and/or set up a number of Direct Debits from the account. This is to encourage you to use it as your main account. So always check the minimum requirements of an account before opening.
Compare current accountsCan I have more than one current account?
You can have as many current accounts as you like. In fact, it’s often useful to have more than one. A second current account can provide a handy backup if your main account has issues or its security is compromised. Some people use multiple accounts for different types of bills. For example, you may want a joint account for shared financial responsibilities, plus another one for managing your own income and personal expenditure.
What’s the difference between a current account and a savings account?
A savings account is an account used to save towards a goal, while your current account handles your day-to-day spending, plus bills and income.
Unlike current accounts, savings accounts don’t usually have an overdraft, so you can’t get into debt. They’re designed to give you somewhere safe to keep your unspent income, where it can grow with a (typically) better interest rate than a current account.
Like current accounts, savings accounts come in many forms, such as instant access, fixed rate and ISAs. There are many options to choose from, which is where we can help you compare.
What’s the difference between a personal current account and a business current account?
A personal current account is for managing your own finances. You can use it to deposit your salary and other income, as well as set up Direct Debits and standing orders to pay bills or other debts.
A business current account manages the money earned and spent by a firm. It’s a legal requirement for limited companies to hold a business account, as banking services and account providers won’t let you use a personal current account for business. If you’re self-employed, it’s not a legal requirement to have a business account.
Frequently asked questions
How much should I pay into a current account?
Typically, there’s no set amount, but some banks insist you pay in a minimum amount each month. If you can’t, or a credit check means you’re refused a current account, consider a basic bank account.
A basic account gives you much the same service, but without the frills. You won’t receive access to credit (often in the form of an overdraft), but you’ll still have a debit card and can pay Direct Debits or standing orders.
Why should I switch current accounts?
Switching current accounts lets you make the most of competition in the banking market. To attract new customers, banks and building societies offer attractive interest rates, which then fall after the first year or two. By regularly switching accounts, you can benefit from better interest rates and other rewards.
What happens to my Direct Debits if I switch current accounts?
When you switch, most bank account providers will transfer your Direct Debits to your new account as part of the Current Account Switch Guarantee. If your old or new current account provider isn’t signed up to the Current Account Switch Guarantee (most are), you might need to contact them to transfer your Direct Debits.
Do I need to tell my bank when I switch current accounts?
Thanks to the Current Account Switch Guarantee, most banks and building societies will handle the switch. They’ll transfer your money from your old account to your new one, and close your old account. They should also automatically switch any Direct Debits and standing orders to your new account, and let your employer know to pay your salary into your new account.
If your old or new account provider isn’t signed up to the Current Account Switch Guarantee, you may need to contact them yourself to organise your switch.
What happens if I have a credit card and savings account with the bank I’m leaving?
Closing your current account doesn’t mean you have to close other accounts, cards or services with that provider. You can have multiple accounts with different banks or building societies. It’s fine to have a current account with one bank, a savings account with another and a credit card with a third provider.
Will I be charged for using a current account?
You shouldn’t be charged for having a current account, unless it's a packaged account with a monthly fee. But do check, because every account has different terms. ATM and over-the-counter withdrawals are usually free, as well as online or contactless payments. But remember, some privately owned cash machines charge for withdrawals.
If you’re overseas, you might be charged to withdraw money – and your bank’s exchange rate can make for painful reading. Avoid using your debit card to withdraw cash abroad. It’s more cost effective to use pre-paid cards or currency. Some credit cards even have great offers for overseas travel. Find out more about credit cards you can use abroad.
Unless you have an interest-free overdraft, you’ll almost certainly have to pay for an overdraft, and it could cost more than you may think. Always check the terms and conditions of any current account for overdraft charges.
Can I add another person to my current account?
Most banks will let you add someone else to your current account, so it becomes a joint account. But your bank or building society may limit the number of people you can tie to one account.
To add someone to your current account, pop into your branch. You’ll usually need to fill out a few forms and show some ID to verify the new account holder.
What fees should I consider when comparing bank accounts?
If you want to switch accounts, you may need to pay certain fees. These might include:
Account fee
How much you’ll be charged on a monthly or annual basis for using the account. Not all accounts charge fees.
Overdraft charges
It’s always worth checking overdraft charges before applying for a current account. Instead of daily or monthly fees, a simple annual interest rate (APR) is charged on overdrafts. The APR reflects the cost of borrowing over a year. Interest is charged at the same rate for arranged and unarranged overdrafts.
Some banks provide an interest-free arranged overdraft, so you’ll only have to pay interest if you exceed it.
Refused payment fee
The amount your bank or building society may charge if there’s not enough money in your account to cover a Direct Debit, standing order or cheque payment.
Other fees
Banks and building societies might charge for:
- Providing duplicate bank statements
- Cancelling a cheque
- Getting a reference from the bank
- Getting a banker’s draft.
Check the annual equivalent rate (AER) on accounts that pay interest. This shows the interest rate you’ll receive on money left in your account for a year, which can be paid annually or monthly.
What’s the difference between a Direct Debit, standing order and recurring payment?
Direct Debits, standing orders and recurring payments are very similar, but there are some key differences:
- Standing order – a regular payment to another person, account or business. An example might be a monthly transfer between your own current account and savings account.
- Direct Debit – another type of regular payment, but one the business or organisation you’re paying must set up. You’ll normally need to sign an agreement to give them permission to take payment. An example is paying your utility bills by monthly Direct Debit.
- Recurring payment – similar to the above, but set up using your card details, rather than your bank account. A good example is when you subscribe to a streaming service like Netflix or Disney+.
How do my current account rewards affect tax?
If your current account offers a reward in the form of a cash payment, it isn’t covered under your Personal Savings Allowance (PSA). This means the rewards will be taxable. If the account offers rewards in the form of discounts, you won’t have to pay tax. Account providers usually take this into account, advertising the amount you’ll receive after tax.
If you’re a higher or additional-rate taxpayer, you might have to pay more tax on your rewards. Depending on your tax rate, and how much interest you earn, your interest payments may or may not be tax-free.
What benefits come with a current account?
It’s tricky to get by in the modern world without a current account and certainly harder to set up cheap broadband deals and phone contracts, for example.
Your current account lets you receive money electronically, set up standing orders and make payments. You can also keep an eye on your balance through an app.
What other perks do current accounts offer?
If you take out a packaged account, benefits can include travel insurance, cashback, breakdown cover and special offers with the bank’s partner companies. Other benefits may include insurance against online fraud.
When comparing current accounts, check the details carefully. Look for benefits that will save you money and try a choose a bank with a reputation for great customer service.
How safe is my money in a current account?
If your current account is regulated by the Financial Conduct Authority (FCA), it’s protected by the Financial Services Compensation Scheme (FSCS). This means you’re protected for up to £85,000 if your bank or financial service provider goes bust. This £85,000 limit covers all accounts held with that provider, so if you have large savings, look to spread your money between different banks and building societies.
Should I consider an app-based current account?
App-based bank accounts are becoming increasingly popular. They’re different to the banking apps traditional banks offer and give you greater control of your account and finances. App-based banks don’t have high-street branches. Instead, everything is done in the app. This gives you a one-stop shop for all your banking needs, with a 24/7 personal bank in your pocket.
Although your account is entirely in the app, some app-based banks allow you to deposit cash and cheques into your account. The process can vary between providers, so check before you open an account.
As well as traditional banking services, app banking gives you other useful features. You can set up spending notifications, which make you more aware of your money and could stop you going overdrawn. You could ring-fence money to protect your savings or temporarily freeze your account when your balance is low.
Traditional banks are starting to improve their digital services, so some offer similar services to app-based bank accounts.
What’s the best bank to switch to?
The best bank to switch to will depend on your personal circumstances. By comparing current accounts, you’ll be able to see which offers the right features for your needs.
How do I compare current accounts?
If you’re looking for the best current account, start by comparing the latest deals. Compare with us to see if you can start saving.
