Bank accounts are perhaps the main tool most people use to manage their finances: money can be both paid in (from employment and other sources) and paid out (to cover bills and payments for things such as mortgages, credit cards, phone contracts, loans, etc.). In the past they have been mainly offered by high street banks and building societies, but now a number of other lenders such as credit unions and online banks offer bank accounts. In addition to this, the range of bank accounts offered by financial institutions has broadened, with the result that borrowers now have a great deal of choice.
Deposit accounts are the standard type of bank account. As described above, they allow money to be deposited and withdrawn as the person holding the account – the depositor – wishes, with any money deposited classed as a liability for the bank. Depending on the type of account, though, there may be restrictions on speed of access to the money deposited, on frequency of access (some accounts, for instance, specify a limit of a certain number of withdrawals within a stated period), or on the amount that can be withdrawn.
These are a type of deposit account that focuses on quick and easy access to any funds deposited with the bank. Access to money is usually available via a counter service in any one of the bank’s branches, or via ATMs (Auto Teller Machines, more commonly known as bank machines). Often these accounts are subject to daily withdrawal limits, with special arrangements needing to be made to withdraw any amount over the stated limit. ATM withdrawal limits are usually quite low, with a maximum withdrawal per day of only £250 or £300.
If they need to borrow money in the short term, holders of current accounts can usually apply for an overdraft: this means they are allowed to keep drawing on funds even after their account balance has reached zero. Borrowers should be beware, however, as most overdrafts come with a number of charges, including regular fees and interest on the amount they are in debt. In addition, banks can opt to remove any overdraft facility at short notice; this can mean the borrower having to pay back a large amount of money very quickly.
Savings accounts are, as the name suggests, intended for those wanting to build up a decent amount of savings. They benefit from a higher rate of interest than standard current accounts, but are subject to more stringent withdrawal restrictions: it is usually the case that if the account holder withdraws over a certain amount of money in a year, or makes over a certain number of withdrawals, then the higher interest rate attached to the account is substantially reduced.
Student Bank Accounts
In an attempt to capture what may be future high income customers, many banks offer special accounts aimed at students. These accounts often have favourable overdraft terms, for example a free overdraft while the student is attending their course, also perhaps for a short time after graduation. Many student accounts also come with free gifts upon the opening of the account.
Business Bank Accounts
Businesses require different banking services than individual customers; business bank accounts have developed as a way to meet these needs. As a result of providing these specialised services – such as the depositing of large amounts of change from tills etc. – business bank account charges are often higher than for standard current accounts, with charges often being levied on individual transactions.
Basic Bank Accounts
Those that have had trouble with debt, and perhaps have undergone bankruptcy or have been subject to a Debt Relief Order, often have trouble obtaining financial products due to their low credit rating. Basic bank accounts cater for these people: such accounts are very simple, having no credit facility and a bank card that only allows withdrawal from ATMs.
Many banks now offer online banking alongside other account services. Online banking allows customers to view account transactions, pay bills, apply for new bank services and transfer money between accounts, or to other account holders.