All you need to know about current accounts

A current account, sometimes known in other countries as a ‘checking account’, is a type of bank account, where money can be paid in, and you can make payments from. They’re provided by authorised and regulated banks. These include names you might recognise from the high street, plus online-only banks which don’t have any in-person branches or physical presence. Usually you’ll get a debit card, either a physical or virtual, or both, to use with your current account.

Current account usage isn’t like credit usage, where the amount you spend is reported to credit reference agencies and appears on your credit report. But, if you’re looking to buy a house, a lender may ask to see your bank statements from your current account to make sure you are responsible with your money. And, overdraft usage will appear on your credit report, as it’s a form of borrowing.

A current account can be used to pay for things, either online or in-person, and where you can get money paid in, such as your salary or benefits, or pay others money. For example, you may need to pay an electrician or plumber for fixing something in your home, or a friend because they bought you pizza.

You can also set up regular payments that go out every week, or a company, like your utility company, may set up a payment to take money from your account regularly. These are called ‘standing orders’ and ‘direct debits’.

Usually, you’ll get what’s known as a debit card to make in-person payments in shops, restaurants and anywhere that takes a card for payment, or to get cash out from a cash machine. In most cases cash withdrawals are free and won’t impact your score.

You can also make payments online using your current account and debit card. You’ll be asked for the ‘long card number’, which is the number with four sections of four numbers. You’ll also be asked for the card’s expiry date, and the three-number security code on the back.

Other people can also pay you money into the account, or you can pay them. To get people to pay you money, give them your account number and sort code, plus your name, which needs to match the name on your debit card. Alternatively, to pay people money, simply ask them for the same details from their account, and find in your banking app or online banking where you can pay someone money. Then, just follow the steps in your app or online.

If you’re over 18, you can go to a bank and open an account, or open one online. You’ll probably need a form of identification and proof of your address, such as a utility bill.

Some people may not qualify for some current accounts, if you have a limited credit history or you’re new to the country. But don’t worry — banks usually offer basic bank accounts to customers who aren’t eligible for other offers. This means you won’t get access to an overdraft or other account benefits, but you’ll still be able to pay for things using a debit card, and send or receive money.

You can either switch your current account using the Current Account Switch Service (CASS), which means your old account will be automatically closed once the switch to your new bank is complete. This is guaranteed to happen within seven days, and will move over everything to do with your current account.

Or, you can open a new account without using CASS, and keep your old account. That means you won’t get your direct debits and standing orders moved over automatically, though.

You can have more than one current account — in fact, there is no limit to the number you can have. Before opening a new current account, though, you should consider whether you need the account, the impact it could have on your credit score and history, and whether you’ll be able to manage the account and not get charged fees or interest.

The guarantee offered by the Current Account Switch Service means your account will be switched to the new one you’ve chosen within seven days. Or, you can choose your own switch date with CASS.

The switch service will take care of moving all your regular payments, such as direct debits and standing orders, over to your new account, plus any incoming payments, like your salary. Any money in your old account will be moved over to your new account on your switch date.

Any payments made to your old account after your switch will be automatically redirected to your new account. CASS will also contact the sender to give them your new account details.

This means you don’t need to do anything manually. Everything will happen automatically, including all your bills and regular payments, like rent, mortgage, utility bills, or anything else moved over without you needing to lift a finger.

Finally, if there are any issues making the switch, CASS will contact you before your switch date. If anything goes wrong after, any interest will be refunded, whether paid or lost, and charges made on either your old or new account as a result of the issue.

Being rejected for a current account can be worrying. But, there are a few things you can to try to get an account.

Firstly, try applying for an account with a different bank. Every bank will have different eligibility criteria, so while one may not be willing to offer you an account, another might be.

Secondly, try applying for a basic bank account. Many high street banks will offer these, and while they don’t come with the perks and benefits the more advanced accounts might do, a basic account will let you pay in money and make payments like any other current account.

If neither of the above work, you could try getting a prepaid card. These will let you add money to the card and make payments, but it isn’t a bank account. Adding money to the card is called ‘reloading’ it — beware that the card provider may charge a fee for this.

Finally, you could also try speaking to a local credit union. These are community-run financial organisations, who might be able to offer you a basic current account. You can find your local credit unions on the ‘Find Your Credit Union’ website.

Not all current accounts are equal. When you’re looking to open a new current account, keep an eye out for:

● Switch incentives. Some banks will offer you a cash incentive to switch your current account to them. Usually you can only get this if you use the Current Account Switch Service — meaning you won’t get the incentive if you open a new account without using CASS.

● Interest rates. Some providers will give you interest on your entire balance, while others will give you savings accounts where you can move the money and build interest on it. The higher the interest rate percentage, the more money you’ll earn.

● Cashback. Some accounts will give you cashback on your spending. This could apply to any spending you do, or spending from certain shops or restaurants. Take note of the amount of cashback you’ll get, and how you earn it.

● Fees. Some accounts come with monthly fees. Usually this is taken from your balance automatically every month. If you sign up for an account with a monthly fee, it’s a good idea to make sure the interest or cashback you earn in total using the account outweighs the fee — otherwise you’ll lose money.

● Spending abroad. Some accounts will apply a fee to your spending abroad, or if you get cash out from a cash machine or ATM. Remember to always pay in the local currency rather than in pounds – it’s usually cheaper. You may find some banks offer no fees when spending abroad, so look out for that if you travel a lot, as it could save you money.

● Overdrafts. Some accounts come with optional overdrafts, which you can use if you don’t have enough money in your account to cover your spending. But, unless your bank has an interest-free overdraft available, interest will be applied to the balance. So, aim and pay it off and get your account back into positive figures as soon as you can. Try not to become reliant on it, as this is reported to credit reference agencies and could affect future credit applications.

● Accessibility. Some banks do not have in-person branches, and only exist online. Some may have online and mobile banking, while others may only have a mobile app. If you need an account with a bank with in-person branches, it may be best to stick with a bank on the high street, whose name you may have heard of in the past.

● Customer service. Check out a bank’s customer service record and see what people say about them on Trustpilot. Some may be contactable 24/7, while others may only have an automated service available around the clock.

An overdraft lets you borrow money through your current account. For example, if you had £20 in your account but you made a payment, either online or in-person, of £30, you would go £10 overdrawn. This means you would have -£10 in your account. This only applies if you have an overdraft on your account. If you don’t and your balance is lower than the amount you’re trying to pay, the payment will be rejected.

It’s important to note this isn’t the same as having a credit card. Your overdraft limit is likely lower than what you’d get with a credit card, and the interest rate may be higher too.

There are two types of overdraft.

● Arranged overdraft: You agree with the bank how much you can go overdrawn, sometimes interest-free up to a limit. Beyond that, interest may be applied.


● Unarranged overdraft: You exceed your balance without prior agreement, meaning you’ll be charged interest every day you’re overdrawn.

If you’re able to get your account back to a positive balance before midnight on the same day, you might be able to avoid paying interest. The more overdrawn you are, the more interest you’ll pay, so it may be a good idea to not become reliant on your overdraft for borrowing money.

Not all accounts come with overdrafts, so if you’re looking to open an account with an overdraft, make sure it has one before applying. Also, some overdrafts may be interest-free up to a certain amount — so look out for those.

Whether your new bank will do a hard search for your credit report depends on whether the account you’re applying for has an overdraft or not.

If it doesn’t have an overdraft, they will only do a soft search, as you won’t be borrowing money. If it does have an overdraft, a hard search will be done — even if the overdraft is optional and you have no intention of using it.

If you’re looking to open a new current account, or switch your existing one to a new bank, you can use TotallyMoney’s current account comparison tool to find the best offer for you. Check it out, only in the TotallyMoney app, today.