Bank Accounts

1. Current Accounts are a loss leading product for banks

Current accounts are used to provide customers with easy access to their money. They allow you to be able to deposit funds which can then be withdrawn either from an ATM, via a transaction, or directly from your bank. They also provide the direct debit feature which allows you to set up regular payments such as utility bills that can be automatically paid periodically. Many accounts also offer online banking enabling customers manage and monitor their finances.

Current Accounts are seen by almost all banks as a ‘hook’ or a ‘way in’ to supplying you with your overall financial requirements. Most banks don’t actually make money out of providing you with a current account, once they take into account things like withdrawal and deposit costs, which carry overheads such as cashier staff, ATM networks maintenance or provision of online banking systems.

The banks therefore do not provide this service from the kindness of their heart, far from it. They provide it with the sole purpose of attracting you to them and getting an insight into your financial affairs. Once they have done this they can then cross-sell you into other, more lucrative products, such as credit cards, savings accounts, loans and mortgages, as and when the opportunity arises.

It is important therefore that you remember a bank is trying to give you a golden handshake when offering you a bank account. It is trying to open the door to future business with you. Gone are the days of the ‘standard’ current account offering 0.1% AER and nothing else. Banks are now competing against each other for the chance to win this lucrative relationship, offering better interest rates (some up to 6.5% AER) and other benefits such as 0% overdraft facilities.

As current accounts are primarily used for transactions, interest rates are generally low on balances. However, some current accounts do offer higher rates of interest used to attract customers, although the high rate is usually only offered up to a specified amount, then anything over is capped at a low rate. For example 8.5% on the first £2,500, then 0.10% on anything over £2,500. Some high interest current accounts only offer these high rates for an introductory period, so always check how long the offer is active for. If you are keen to make high interest savings it may be worth looking into a feature such as sweeping which is used to transfer excess funds from your current account into a high interest savings account.

2. Think about your banking needs – do you really need a local branch?

The main factor you should be thinking about with your current account is ‘serviceability’ i.e. how easy it is for you to access your account and deal with your affairs. If you have a heavy dependence on a cashier for paying bills or depositing cash, then you should look for a bank that offers an extensive branch network covering your local area.

3. If you bank online you will get a better deal!

If you are very busy and do not have time to access a branch, or simply do not have the need (as your salary is paid directly to your account, and your bills are mostly direct debit) then you should be looking for a bank account provider that offers state-of-the-art online banking access and telephone support, rather than local branches. You should expect to receive a better rate of interest and benefits such as 0% overdraft facilities as managing accounts online and via the telephone reduces the overheads of a bank managing your account, allowing them to pass on these savings in the form of better rates. You should remember that these ‘internet’ accounts still allow you to pay cash into them through the post office, or one of the big four banks branch network.

4. How can you benefit from an overdraft?

Most current accounts offer an overdraft facility which can be used as a form of borrowing. The limit provided is usually negotiated with your bank and can normally be increased or decreased where required. Some banks offer a small interest free overdraft facility without requesting, but you should always check with your bank to avoid penalties. Interest rates usually apply to some or all of the overdraft so it is always best to check the rates applied.

5. Which4u offers single table comparison

Which4u aims to make this task of finding the right bank account for you as quick and painless as possible by listing banks accounts providers side-by-side in our simple to use tables. Competition between current account providers is increasing and therefore these tables allow you to compare the main differentiating factors, interest rates and overdraft facilities.

Simply select the account provider that offer the best deal for you and click ‘Apply’. You will then be taken to that banks website to make your application. In most cases you should get an instant decision online!