How bank accounts work
There are two main types of bank and building society accounts: current accounts and savings accounts.
You pay in ("deposit")
the money you receive, such as your wages
or student
loan
You take out ("withdraw")
money, when you need to pay for things.
Current Accounts
A current account is the basic account for day-to-day transactions.
You'll receive a regular bank statement—probably once a month—to show you how much has been paid in, how much you have withdrawn, and how much money you have in your account (your "balance"). Your statement should also show how much interest your money has earned, but this is usually a small amount due to the very low interest rates that current accounts offer.
It's well worth checking your bank statement to make sure everything in it is accurate. This means checking the withdrawals you have made or bills you have paid ("debits"), as well as the money paid into your account ("credits").
Every bank and building society offers a variety of different current accounts with different incentives and rates of interest. Many have versions of the following:
- Standard Current Accounts
C heque-books, cash and debit cards, overdraft facilities and monthly or quarterly bank statements, often with internet access and telephone banking facilities - Student Accounts
Usually interest free overdrafts and free gift or cash incentives for joining.
More advice about student banking at Yahoo! Finance Student Zone. - Graduate Accounts
Usually good interest rates on overdrafts, loans and mortgages
With your current account you can be issued with a cash, debit, cheque
guarantee and credit card.
More about plastic
cards.
Savings Accounts
For saving money for other than very short-term purposes, a savings account with a bank or building society is better than a current account because you will earn more interest.
You can use it either to save regularly, or when you have some spare cash.
It's a good idea to check the conditions for withdrawing cash from the account before you start saving (for example, you may have to let the bank know of a withdrawal days in advance).
Like current accounts, every bank and building society offers a variety of different accounts with different incentives and rates of interest. Many have versions of the following:
- E-Savings Account
This is an internet account for which you receive a pass-code for security. They usually get a higher rate of interest that most savings accounts because it is all done online. - ISA
Tax-free Savings Account. There are two types of ISA. You are allowed to open them every tax year, currently up to a value of £7,200.
More about ISAs at MoneySupermarket.com.
Online Accounts
Most bank and building society accounts have the facility to be managed online. For this you will be given a passcode. This makes it easy for you to keep an eye on your spending as well as make transfers and payments.
This page was updated on 15 July, 2008
