How to choose a bank account

Before you choose your account, find out what comes with it. A standard current account will usually provide:

• a debit card 
• an arranged overdraft facility - subject to approval by the account provider (You must be over 18 years old for an arranged overdraft facility)
• a cheque book 
• the facility to set up payments by Direct Debit and standing order

You can normally open a standard current account for free, and there aren’t usually any monthly fees. The simplest bank accounts are usually called ‘basic bank accounts’. These typically offer a debit card, Direct Debit and standing order facilities, but no overdraft, cheque book or other features. A basic bank account could be right for you if you’ve been turned down for other accounts on the basis of your income or a poor credit rating.

If you want more from your bank account than the standard range of features and services and you’re willing to pay for it, it might be worth looking at current accounts called ‘packaged bank accounts’. These accounts offer extra services which sometimes come with a monthly or annual fee. They might include things like:

• travel insurance
• breakdown cover
• access to preferential savings rates

If you sometimes need to borrow in the short term, you may want to look closely at the overdraft facility your bank account offers.

Arranged overdrafts are those agreed with your account provider in advance. These will be cheaper than going overdrawn without permission, which can incur large fees and also affect your credit rating.

To compare overdraft charges look at the Equivalent Annual Rate (EAR) and any other fees. The EAR shows how much borrowing would cost if you were overdrawn for a year. Also look at the limits for fee-free arranged overdrafts.

You won’t usually pay any fees for a standard current account, but you may have to for packaged bank accounts (accounts which charge a consumer a monthly or annual fee) or for facilities like an overdraft. Monthly fees can seem quite small, but it makes sense to add them up to see if you could get the benefits cheaper elsewhere.