A bank account is essential if you want to make and receive payments. A bank account also provides a secure place to keep your money.
Types of bank account
Different banks – and other providers of financial services – offer a wide range of different accounts, aimed at different groups of customers.
Personal accounts, aimed at the public, include:
- Current accounts. These are typically free and allow you to pay in and withdraw money when you like. Current accounts generally pay no interest on any money held in them. A current account may also offer an overdraft facility, allowing you to borrow money short-term.
- Savings accounts. These pay interest but place restrictions on how you can withdraw money. With a fixed term account, you must leave the money in the account until an agreed date or pay a penalty. A notice account requires you to give advance notice (typically one month or longer) if you want to make a withdrawal. Some accounts limit the number of withdrawals you can make.
- Joint accounts. These can be used by more than one individual – for example, a couple.
Banks also offer a range of business accounts. Again, these can include current and savings accounts. Business accounts typically carry charges, often a fee for each transaction and a monthly service fee, though many banks offer a free introductory period for new customers.
Banking accounts and other services for smaller businesses are often described as “business banking”. “Commercial” and “corporate” accounts and services are aimed at large businesses.
Bank account providers
The best-known bank account providers are the ‘high street’ banks. These include Barclays, HSBC, Lloyds, NatWest and Santander. These banks often have branches in major towns which can be convenient if you want to visit the bank – for example, to pay in cash or to talk to someone.
Building societies offer a similar service to high street banks. Major building societies such as Nationwide operate nationally, while some smaller building societies concentrate their operations in a particular part of the country.
More recently, new account providers have emerged. In particular, these include online-only providers such as Monzo and Starling. Without the costs of maintaining physical branches, and able to develop new digital services from scratch, online providers have a reputation for competitive charges, more user-friendly apps and a more innovative approach to new services.
The best bank – services, security, cost
Choose a bank that offers the services you want, at a competitive price, and has a good reputation.
Many customers do most or all of their banking online, so a good website and/or smartphone app is important. Some customers feel reassured by having a local, physical branch of their bank. Online-only providers (and other banks) often have arrangements that allow cash to be paid in through the local Post Office or in a shop offering PayPoint.
Some customers also prefer to deal with a larger, better-known bank – in part, because they feel this is more secure. However, accounts offered by regulated banks and building societies (including online-only providers) are usually protected by the Financial Services Compensation Scheme, up to a maximum of £85,000 held with any one banking group. You may want to check whether your account will be covered before deciding where to bank.
You may also want to consider whether you are going to want other banking services – for example, if you will also want to borrow. However, you don’t have to get all the financial services you want from the same provider.