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What is a current account?
A current account is a bank or building society account that allows you to manage your spending on a day-to-day basis. Your salary can be paid into it, and direct debits and standing orders can be set up. Some current accounts pay interest on balances, offer cashback on spending and many come with an overdraft facility.
Which is the best current account for me?
Finding the best current account for you will depend on your financial situation and what you need the account for. We’ve listed out the different types of current accounts to help you make the best choice.
- Standard current accounts provide many useful services. You can have your salary paid directly into a current account, settle bills or set up direct debits. These accounts usually provide a debit card that allows you to make cash withdrawals and to pay for items. When comparing current accounts, you should consider interest rates, overdraft limits, cashback opportunities, rewards and monthly fees. Consider these carefully to find out if an account suits your financial situation.
- Packaged accounts are aimed at customers looking for additional extras on top of what’s available with a standard account. Additional extras like travel insurance, mobile phone insurance, breakdown cover and cashback are typically available. However, this type of account often comes with monthly or annual fees, so weigh up the benefits versus any fees and make sure it works for you.
- The best student bank accounts aim to meet the needs of those studying at college or university and typically offer interest-free overdrafts. An interest-free overdraft is one of the main attractions of student accounts, allowing you flexibility and the ability to pay off any debt throughout your years of study. This saves you from accumulating compounding interest, and your debt from extending further, on top of any student loans you may have taken out.
- The best graduate bank accounts are specifically designed for graduates to help pay off overdrafts built up while at university. They normally offer interest-free overdrafts for up to three years, as well as exclusive deals on things like holidays, events, insurance and more. These accounts may charge a monthly fee, so be careful when comparing accounts.
- Basic bank accounts are available to anyone. They tend to suit people who are unable to qualify for a standard account, perhaps because they have a low credit score or have only recently moved to the UK.
- Joint accounts can work like any other type of current account. The only difference is that both of you are responsible for the income and outgoings for the account. These are common for couples with shared financial responsibilities, like a mortgage, rent or other household bills. For joint accounts, keep in mind any limits to the number of account holders (if you need more than two), as well as any benefits you could typically find in individual accounts, such as cashback, rewards and interest rates.
- Cashback current accounts offer a percentage return in cashback on selected monthly bills, like your mortgage, energy and other utility bills. While these accounts charge a monthly fee, if you can get the right account combined with the matching cashback qualifiers, you can begin boosting your income further. Comparing cashback benefits is the best way to find the right deal for you.
- Reward accounts can include great benefits like travel or home insurance, railcards and other discounts. These accounts normally require a monthly fee, so make sure the rewards are worth it for you.
- Bank accounts with overdrafts are most useful for students, but are available to anyone over 18. Some come with interest-free limits, allowing you to essentially borrow up to a specified amount free of charge, while others impose differing interest rates, depending on how much you’re overdrawn. The best bank accounts if you’re overdrawn, are typically the ones which offer interest-free limits.
What should I consider before comparing current accounts?
It’s worth thinking about how you plan to use your current account. Consider your money flow - what amounts do you estimate putting in and taking out each month? Will you need an overdraft? Do you move money often? These sorts of things will help you narrow down your options and help you find the current account with the right features for your lifestyle.
Once you’ve decided which type of current account is best for you, here are the things you need to consider, to narrow your search for the right account:
- Interest rates
- Overdraft (including limits and interest rates)
- Rewards and other benefits
- Monthly account fees
- Contactless payments
- Mobile and online banking access
The best current account is different for everyone, with your financial situation being unique to you. By comparing accounts with Compare the Market, we hope that you can find the right fit for you.
Online banking and mobile banking
The best current accounts now offer the flexibility and accessibility of online and mobile banking. This allows you to take control of your money using the smartphone in your pocket, or any other connected device. With online and mobile banking, you may be able to:
- Check your balance
- Pay bills
- Set up direct debits
- Transfer money between your accounts
- Connect to your mortgages or other loans
- Authorise digital payments
- Set up limits to your spending
- Freeze your account
How to switch a current account online
Once you’ve decided to switch your current account, and chosen the type of account you’d like to switch to, there’s a relatively simple process to get you up and running:
- Compare current account deals – choose the type of account you’re looking for and we’ll show you a list of offers. You can compare the interest rates, overdraft limits, account benefits and more, to find the best current account for you from our list of providers.
- Complete the application – once you’ve found the right offer for you, simply complete the application process by clicking through to your new provider.
- Organise the switch – most banks under the current account switch service will now handle this for you. They’ll transfer your money to your new bank, along with any direct debits, and inform your employer to switch your salary payment, before closing your old account. It’s important to check this though, as you may be responsible for some or all of the process if the bank you’re switching to isn’t part of the switch service scheme.
Just as when you open any new bank account, you’ll need to give your new provider certain information. This will include forms of 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 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 it’s not part of the switch service, expect it to take up to 10 working days.
What benefits can I get by switching current accounts?
The current accounts market is extremely competitive, with new bank account offers regularly introduced to lure new customers. You can often find a large number of benefits and rewards when you open certain types of accounts. Better rates of interest are a clear advantage, but others include cashback, travel insurance, breakdown cover and more. It’s well worth shopping around and comparing for the best current accounts available.
Be aware, though, that when you switch current accounts to receive rewards, there may be a requirement 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 bank account.
Frequently asked questions
How much should I pay into a current account?
Typically, there’s no set amount. However, some banks might insist that you pay a minimum amount into your account each month from your wages, benefits or other means. If you can’t do this, or a credit check means you’re refused a full current account, then consider a basic bank account.
A basic account will give you much the same service, but without any of the frills and you won’t be given access to credit (often in the form of an overdraft). You can still have a debit card, though, so you can make direct debit or standing order payments.
Why should I switch current accounts?
Switching current accounts allows you to make the most of the competitive banking market. Account providers are always trying to lure new customers by offering attractive interest rates, which fall through the floor after the first year or two. By switching accounts regularly, you can maintain a stronger interest rate, as well as make the most of other benefits and rewards. For current accounts, it really does pay to switch!
Do I need to tell my bank when I switch current accounts?
Thanks to the Current Account Switch Guarantee, most banks or building societies will handle the switch between them, transferring you existing money from your old account to your new one, before closing your old accounts. They should also switch all of your direct debits and standing orders to your new account for you automatically, as well as updating your employer on the account to pay your salary.
If either your old or new account provider are not signed up to the Current Account Switch Guarantee, you may need to get in contact with them yourself, to organise the switch manually.
Can I have more than one current account?
You can have as many current accounts as you’d like. In fact, it’s often very useful to have more than one. A second current account can offer a useful back-up option, if your main account has issues or its security is compromised. Some people also use multiple accounts for different types of bills. For example, you may want a joint current account for financial responsibilities you share with a partner, as well as an individual one for managing your remaining income and personal bills.
Will I be charged for using a current account?
You often won’t be charged for having a current account (unless it's a packaged account that comes with an agreed monthly fee). But do check, because each account will have different terms. Withdrawals from cash machines, over-the-counter and online or contactless payments are often free of charge. However, you can sometimes get charged fees in cash machines that are privately owned.
If you’re overseas, then you’ll typically get charged to withdraw money - and your bank’s exchange rate can also prove painful. You should try to avoid using your current account’s debit card to take out cash abroad. Find other solutions, such as 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 with a current account, and it can cost more than you might think. Make sure you check the terms and conditions for any overdraft charges.
COVID-19 and overdrafts
People facing financial difficulties because of coronavirus had until 31 October 2020 to ask for an interest-free overdraft of up to £500 for three months. They were allowed to request this to be extended for another three months if they were still having problems.
Banks are no longer required to offer this support, but some are still offering help, including allowing interest-free overdraft periods or capping overdraft interest charges.
Remember, if the interest rate is temporarily reduced on your overdraft, it'll return to the normal rate after any temporary period ends.
If you’re currently having difficulties because of the pandemic, you should approach your bank or building society for tailored support.
Please note: This information was correct at the time of publication on 18 February 2021 but, because of the impact of COVID-19, things are changing rapidly. We aim to keep this page updated, but please check with your bank directly to confirm any details.
What fees should I consider when comparing current accounts?
- Account fee: This is how much you’ll be charged on a monthly or yearly basis for using the account. Not all accounts charge a fee.
- Overdraft charges: It’s worth checking overdraft charges before you apply for a current account. In April 2020, new rules came into force meaning that a simple annual interest rate (APR) is now charged on overdrafts, without any additional fees and charges like daily and monthly fees. The APR shows the cost of borrowing over a year. Interest is now charged at the same rate for arranged and unarranged overdrafts.
Some banks will provide an interest-free buffer on an arranged overdraft, so you won’t pay interest unless you exceed it.
Find out more about how APR works
- Refused payment fee
This is the fee the bank or building society may charge if there’s not enough money in your account to cover a Direct Debit, standing order or cheque.
- Other fees
Banks and building societies may charge fees for:
- providing duplicate bank statements
- cancelling a cheque
- getting a reference from the bank
- getting a banker’s draft.
On current accounts that pay interest, check the annual equivalent rate (AER). This shows the rate of interest you would receive on any balances left in the account over a year and it can be paid annually or monthly.
How do rewards from my current account affect tax?
If your current account offers a reward in the form of a cash payment, this is not covered under your Personal Savings Allowance (PSA), which means these rewards will be taxable. If the account offers rewards in the form of discounts, these are not subject to tax. Account providers will often take this into account, with the gross reward being higher than the advertised figure, which is what’s actually paid to you, after tax.
If you’re a higher-rate, or additional-rate, taxpayer, you may be required to pay more tax on your rewards. Depending on your personal tax rate, along with the amount of interest you earn, interest payments may or may not be tax-free.
What benefits come with a current account?
It would be hard to function in the modern world without a current account, and you might find it difficult to set up many of the things you take for granted. This includes cheap broadband deals, a phone contract and all kinds of other simple pleasures.
You can receive money electronically, set up standing orders and make payments to other people over the phone and online. Plus, you can often keep an eye on your balance through mobile apps.
What other benefits can current accounts offer?
If you decided to take out a packaged account, the benefits are wide ranging and include: travel insurance, cashback, breakdown cover for your car and special offers with the bank’s partner companies. Other benefits might include protection from online fraud cover, which can be a lifesaver should the worst happen.
When you’re comparing current accounts, look through the offer details very carefully. Look for benefits that will save you money and consider opting for a bank with a reputation for strong customer service.
Should I consider an app-based bank account?
App-based bank accounts are becoming increasingly popular in the UK. These are different to the apps on offer from the traditional banks, which offer you greater visibility of your normal account and finances. App-based banks don’t have high-street branches for you to visit, with all the customer service instead found in the app. It creates a one-stop-shop for all your banking needs, with a 24/7 personal banking assistant in your pocket.
Even though your bank account is purely in the app, some app-based banks still allow you to deposit cash and cheques into your account. The process may vary from one account provider to the next, and some may not allow you to do this at all, so it’s important to check before opening an account.
As well as all the traditional services a bank offers, banking with an app gives you plenty of other useful features. You can set up spending notifications, allowing you to become more aware of your money and prevent you from going overdrawn. It also offers beneficial saving options, such as the ability to ring-fence money to protect your savings, or to freeze your account temporarily when your balance is low. These features allow you to be more flexible with your money, giving you instant access at any time of the day.
It’s important to note that many traditional banks are beginning to offer similar services to app-based bank accounts, improving their digital services considerably to keep up.
How do I compare current accounts?
If you’re looking for the best current account, start by comparing the latest deals. Compare with us now, to see if you can start saving.