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Types of bank accounts

There are a number of different types of accounts available all with different advantages and disadvantages. Some are for day-to-day management and others for more long-term saving. Banks pay interest on the money you deposit. The rate of interest varies between bank accounts and is expressed through the Annual Equivalent Rate (AER). The higher the AER, the more interest you will receive on your savings. E.g. AER of 3.8% is better than AER of 2.5%. 

Basic bank account

• They are useful for managing day-to-day money.
• They let you pay in and take out money easily, but may not pay much or any interest (a low AER).
• You’ll receive a cash point card.
• No cheque book will be offered but cash can be withdrawn at machines.
• No overdrafts are offered so you can only purchase goods or services if you have the money in your account.
• Credit checks are not usually required.
• Direct debits and sometimes standing orders can be set up.
• You’ll receive a regular statement showing how much you have paid in (deposits) and taken out (withdrawn).
• When opening an account you will need to provide some form of identification. If you are under 16 you may also have to ask your parent or carer to open the account for you.

Current account

• Current accounts are also for managing day-to-day. Similar to a basic bank account but offer additional features.
• You’ll receive a cheque book and cash point card.
• You can set up overdraft limits allowing you to spend more than you have in your account. You are usually charged interest on using an overdraft.
• An overdraft is a form of credit – so is usually only available to 18 year olds and older.
• Keep a careful check on the balance in your account so you don’t run up an expensive overdraft.

Savings accounts

• Savings accounts pay more interest (a high AER) but it usually takes longer to withdraw money from them.
• They are useful if you have money to put aside or are saving up for something special.

Useful websites

Money Made Clear
Impartial consumer information from the Consumer Financial Education Body.

What About Money
Impartial financial consumer advice for young people.

Citizens Advice Bureau
Offers free confidential advice to help you budget and look at ways of managing your money.

Money Saving Expert
The website is about finding the best deals out there and provides tips on how to save money on everything and anything.

Online resources

Credit Card Repayment Calculator
Use this handy repayment calculator to work out when you're likely to pay off your credit card bill and how much more quickly you could pay it off by making a higher monthly repayment. 

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