It’s not a case of just open any current account anymore. It really pays you to take time to look out the best current account deals available! Banks offer incentives these days to potential new customers including quite substantial amounts of free cash (yes £125!) or cashback on household bills.
You do need to do some homework first before taking out your first account or switching from an existing current account. There are many different options available and it’s not just the big four high street banks that offer current accounts; there’s many others including building societies and on line accounts.
It’s a good idea to first think about what you need from a current account. Are you likely to go overdrawn or are you always in credit? How much income a month do you have available to pay into the account? This should help in sorting through the hundreds of options available to you. Take your time and be picky!
“I already have a current account and switching is too much hassle”.
Wrong. Banks for a while now have had facilities to transfer direct debits and standing orders for you with no hassle so the only ‘work’ you need to do is to ensure that your employer or any other organisation that pays you money, knows your new account details. Banks also employ dedicated teams to run the handover smoothly for you. Once you are sure that everything is transferred, after a few months of running your new account successfully, you can close the old account but don’t be tempted to close it straight away.
“What’s in it for me if I switch my current account?”
Opening a new account can earn you cash up to £100 or more with some deals. If you are regularly getting charged for going overdrawn, it is worth checking other deals with your bank where you won’t keep getting charged or arranging an overdraft that helps you function each month without getting penalties. If your current bank is ripping you off on charges, check the competition. Banking is generally free but if you go into the red, it can cost you hundreds in bank charges as they are usually based on a charge per item on your statement, once you are overdrawn, so switching could save you the most money in cutting down on bank penalties.
Other considerations are the add-on benefits that some accounts offer. They may charge you a fee but this can be offset by the interest they pay on your balance and their benefits, such as mobile phone insurance, may be cheaper than what you currently pay. Travel insurance is often included in some account benefits so if you holiday each year and are paying for this separately, you could save this expense.
Banks will want to know what you deposit per month into your account. This will typically be your wages but may include average pay-ins through the month if you are self-employed or earn income via several sources and pay money in sporadically through the month.
This is, as mentioned earlier, the biggest cost to you if you don’t manage your money well or know what your overdraft limits are. So getting this right is potentially the biggest saving for you.
Top tips to reduce your overdraft costs are:-
1. Make sure you have on line banking or mobile banking and check your balance account daily.
2. Make an up-to-date monthly budget of your income and outgoings right down to the nitty gritty items you know you spend money on each month, eg newspapers, cappuccinos in those high streets, pints in the pub etc.
3. If you’re going to go into the red, use a 0% credit card for essential purchases but make a diary date to pay it back when you’re back in the black.
4. If you know you’re going to go into the red, ask a friend or parent to lend you money temporarily.
Best Current Account Deals
This is an ever-changing market but right now,
If you can stay in the black all month, check out:-
Santander min. salary £6,000 highlight:- up to 3% cashback on bills
Nationwide Flex account min. salary £9,600 highlight:- includes travel insurance.
Halifax min. salary£14,000 pa highlight:- £100 cash bonus.
First Direct min. salary £22,800 pa highlight:- £125 cash bonus
If you are unable to pay in a fixed amount each month, check out:-
Halifax reward account. Highlight:- needs £1000 minimum paid into the account to earn any interest and a good credit score
Opening an account – the procedure
Banks will carry out a credit check on you initially. This is because they are required by law to ‘know’ who you are. They will ask for ID so they know your date of birth, where you live, utility bills, proof you are a student (if you are!) and so on. They may take checks from your previous bank if that is applicable.
They will issue you with debit cards and cheque books and paying in books. They will advise you on their internet banking or phone banking options and how to set up direct debits and standing orders. It may be a good time to ask them to review your account in 6 months time to see if you could qualify for their best current account deals available at that time.