Current accounts

Your current account handles your day-to-day spending, bills and income. You can use it to set up direct debits to make regular payments.

Savings accounts give you somewhere safe to keep your unspent income. Unlike most current accounts, savings accounts pay interest, allowing your money to grow over time.

There’s no set amount, but some banks insist you pay in a minimum amount each month. If you can’t do this, or are refused a current account, consider a basic current account instead.

When you switch current accounts, most providers will automatically 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.

No, you don’t need to tell your bank you’re switching, provided your old and new provider are signed up to the Current Account Switch Guarantee. You just need to ask your new provider to move your account.

They’ll transfer the money from your old account to your new one, along with any Direct Debits and Standing Orders, and close your old 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.

A personal current account is for everyday banking, like getting paid and paying bills using Direct Debits and Standing Orders.

A business current account is for the money a company earns and spends. Limited companies are legally required to have a business account.

If you’re self-employed, you don’t legally need a business bank account. However, it could still be handy to get one, as it separates your personal and professional expenses, making them easier to manage.

Closing your current account doesn’t mean you have to close other accounts, cards or services with that provider.

Each account is separate, so your credit card and savings account will stay active even if you switch your current account.

You can have multiple accounts with different banks or building societies.

Yes, most banks will let you add another person 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.

You should consider that you’ll be financially linked to whoever you share the joint account with, which could affect your credit rating if they have a poor credit history.

There's a range of fees that can come with using a current account, including:

• A monthly or annual account fee – these usually only apply to packaged accounts

• Overdraft charges – instead of daily or monthly fees, a simple annual percentage rate (APR) is charged on overdrafts

• Refused payment fees – sometimes charged if there’s not enough money in your account to cover a direct debit, standing order or cheque payment.

Providers might also charge for:

• Issuing duplicate bank statements

• Using your debit card overseas

• Cancelling a cheque

• Getting a reference from the bank

• Getting a banker’s draft.

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 that you set up yourself. For example, a fixed monthly transfer from your current account to your savings account.

• Direct debit – a regular payment set up by the business or organisation you’re paying. For example, paying your utility bills by monthly direct debit. You'll normally need to sign an agreement to give them permission to take payment.

• Recurring payment – similar a direct debit, but it's set up using your card details rather than your current account. For example, subscribing to an online streaming service.

If your current account offers a cash reward, such as a regular payment for maintaining your account, this isn’t covered by your Personal Savings Allowance (PSA). That means it's taxable.

However, rewards such as cashback and cash bonuses for switching current accounts are considered a discount, so you don't have to pay tax on those.

If you earn interest from your current account, this is taxable, but only once you've used up your PSA. This means:

• Basic-rate taxpayers can earn up to £1,000 a year in tax-free interest

• Higher-rate taxpayers can earn up to £500 a year in tax-free interest.

Additional-rate taxpayers don't have a PSA, so all their interest is taxable.

If you don’t need to visit a physical branch and prefer managing your money online, an app-based bank account could be for you.

They usually have the same capabilities, including depositing cash via an online transfer and even paying a cheque in using the camera on your phone.

The process can vary between banks, so check before you open an account.

Many app-based banks such as Monzo and First Direct have excellent customer ratings, so you can still get reliable support when you need it even without a branch.

Yes, you can usually switch current accounts if you’re overdrawn.

Your new bank may agree to match your existing overdraft, but this depends on your credit check and the new bank’s lending rules.

If you’re in an unarranged overdraft, you might need to clear it first. Always confirm with your new provider before starting the switch.

Yes, you can have multiple current accounts. Just be careful not to apply for too many accounts in a short space of time, as this could damage your credit score.

Some people use different current accounts for different bills.

For example, couples may want a joint current account for shared mortgage payments alongside their own accounts for personal spending.

An authorised overdraft is an overdraft agreed with your bank in advance, also known as an arranged overdraft. It lets you spend more money than is in your account up to an agreed limit.

You’ll usually be charged interest for using an arranged overdraft and you need to pass a credit check to be accepted for one.

An unauthorised (or unarranged) overdraft is when you either go overdrawn without first agreeing to it with your bank, or you spend more than your arranged overdraft limit.

You may be charged interest for using an unarranged overdraft and it’s likely to damage your credit score, making it harder to borrow in the future.

If you’re struggling to repay either an authorised or unauthorised overdraft, acting quickly can help limit costs and prevent the debt from growing.

Our guide to paying off an overdraft explains ways to reduce what you owe.