Why Bother With a Current Account?

Some people still prefer the bed to the bank, although it is a fact of life that a bank account is a must for people who want to go on and own a home and have access to important personal finance tools such as a credit card.

Current accounts are also a more secure way to conduct you financial affairs thank keeping large amounts of cash at home. And if these points haven't convinced you, it is a fact that many current accounts are now far more user-friendly than ever before, furnishing current account holders with interest on credit balances (unheard of a few years ago) and a whole array of payment facilities.

Maintaining the ideal balance

There are no restrictions on how long you keep your cash in your account or on withdrawing money from it, apart from the availability of funds and the limit on how much cash you can withdraw from an ATM in any one day (usually £250 or £300).

You may be required to keep a minimum balance in your account, however. Some current accounts have tiered rates of interest, so if your balance falls below a certain level you'll earn a lower rate of interest.
Even if your current account does pay a good rate of interest it is not a good idea to keep a big balance in your account. You could almost certainly get a better deal elsewhere in an instant-access mini cash individual savings account (ISA), because returns are tax free.

The ideal balance in a current account differs from person to person, but as a general rule you shouldn't have more than you need to cover the month's outgoings. Keeping tens of thousands of pounds in your current account makes no sense because your money can earn more interest in a savings account or mini cash ISA.

Work out how much you need to cover your bills and expenses each month, allow a couple of hundred pounds as a buffer in case of unexpected outgoings (the exact amount will depend on what you feel comfortable with) and put the rest where it will earn a better rate of interest.

Paying the Charges

You pay no charges on most current accounts if you are in credit, although packaged accounts impose a monthly fee for a range of additional services.
You may have to pay a fee of £1 to £2 for using 'convenience' cash machines to withdraw money in small shops and service stations, however, and will be charged for special services such as sending money abroad.

Most banks charge for going overdrawn. As well as the overdraft rate, you may also have to pay a monthly or quarterly fee. Many banks offer a fee-free overdraft buffer of up to £500, while others charge as much as 30 per cent for unauthorized borrowing.

You may - or may not - have to pay fees for other services such as requesting a duplicate statement, using an ATM abroad, or stopping a check. So, for example, if you travel frequently, finding an account that doesn't make you pay to use an ATM when you're outside the country makes sense.

Paying for packaged accounts

A number of banks provide packaged accounts include free annual travel insurance plus a range of benefits and services mission on foreign currency, and free break-above and beyond your standard current down recovery.