BANKING ON YOUR FINANCES
Before choosing a bank account, it's a good idea to think about what services you need to meet your day-to-day and long-term financial needs, and to then shop around for the best account that provides the convenience, rewards, and service you need.
Choosing a Bank Account
Remember to choose a bank account that suits your needs. Search the internet to review bank accounts, features and services. A range of websites specialise in comparing bank accounts and banking services.
What to consider when choosing a bank account:
- Convenience – Are the services, access and opening times suitable to my needs?
- Fees, charges and costs – Am I paying the least that I can for the services that I need or may occasionally want. Could I get these services somewhere else for less?
- Added features or benefits - Are these features or benefits useful to me? Could I get them for less elsewhere?
Carefully read all the information about your account – terms, conditions, limitations, and charges in order to avoid any unwanted surprises.
Keep checking your bank account features and services and switch accounts or banks for better deals.
Ensure that you regularly check other bank accounts and switch if there are better features, services and cheaper charges.
Types of Accounts
The four main types of bank accounts are:
- Current Accounts – Allows direct debts and payments. There are a number of current accounts available, ranging from a basic bank account with no fee and no overdraft facility, to monthly-fee-accounts which offer a range of added value benefits. Choosing the right one for you will depend on how you spend your money, if you require the flexibility of an overdraft facility, and if you regularly make money transfers.
- Jam Jar account – Available through your credit union. You tell the credit union how much money should be placed in each expenditure or savings ‘jar’. Standing orders or direct debits are set up based on your request. You may be charged a fee for using the jam jar service.
What You Need to Open a Bank or Building Society Account
There is a process to go through in setting up a bank account and your chosen bank or building society will require two sets of documents:
- Proof of address
- Proof of identity
These could be:
- A verified copy of your passport, birth certificate, or driving licence
- Statements from banks and utility companies, which are less than three months old
- Utility bills, less than three months old
- Proof of tenancy or ownership of your home
- A solicitor’s letter confirming a rent agreement or house purchase within the past six months
- A letter from the Department for Work and Pensions.
Incentives and Rewards
Introductory rewards may only last for a limited period, for example when switching to another bank or opening a new account.
Rewards, usually financial, may be paid regularly or on a specified date, payment, or occasion. These rewards vary and may range from cashback to vouchers.
Some bank accounts offer added-value benefits, such as: Home, car, lifestyle perks, contents or travel insurance, and breakdown cover. These are usually connected to special bank accounts that attract a monthly fee and there may be limitations. Terms and conditions apply.
Fees and Charges
Fees and charges are usually applied for some services or if you try to spend more money that you have in your account. For example, overdraft fees or when a payment is blocked due to insufficient funds.
You may also be charged:
- Cash machine (ATM) fees – if you use your card abroad or in some ATM machines in the UK
- Foreign transaction fees – if you access your money or use credit whilst abroad
- Same day bank transfer fees
- One off item fees – You may be charged a fee for some services, such as duplicate statements, or mortgage applications
You can avoid or reduce bank charges by planning and monitoring your spending agains your budget. Read more advice on managing your budget.
Text alerts can be set up through mobile banking to give you notice when you are about to go into an overdraft. You are less likely to incur unarranged overdraft charges if you use a mobile banking app or text alert service.
Ways to Pay Your Bills and Contacts
You can set up online banking giving you 24/7 access to your bank account and bank services. You will need a secure internet network to do this and a secure password.
This allows payments to be made from your mobile device.
Direct Debits or Standing Orders
You can set up payments to be made from your bank account on any given day, week, or month, even annually. It's easy to set up and your bank can help you to do this. This is a particularly good way to help budget and manage your finances so that you can calculate exactly how much money leaves your account every week or month to cover regular payments, such as rent, mortgage, utility bills, insurance, loans etc.
Your bank will set a credit limit which may allow you to spend money on credit; or an overdraft. The difference between your actual bank balance and how much you are allowed to spend is called your credit limit. Credit is usually provided with an overdraft or credit card. You will usually be charged a fee if you use credit unless you have a special bank account in which you pay a monthly service fee for various benefits, including free overdraft facility.
You are usually provided with a debit card when you open a bank account. A debit card does not provide any credit. You can only spend the money that you have in your bank account.
Home, car, lifestyle perks, contents or travel insurance, and breakdown cover are some of the added features that some bank accounts give its customers. These are usually connected to special bank accounts that attract a monthly fee and there may be limitations. Terms and conditions apply.
Money management app
Some banks provide a money management app, which allows budget preparation and access to check your spending.
You can ask your bank to send a text when you are near your spending limit.