Choosing the Right Current Account
When it comes to choosing a bank account, the choices seem almost endless. Every bank offers multiple different types of current account, with everything from a basic charge-free cash account to complex reward accounts that provide overdraft facilities, insurance and even breakdown cover for your car.
One way banks are enticing new customers is by offering various rewards, financial and otherwise, for switching your account to them. Choosing the right account and the right rewards will depend on your financial situation, and some benefits will be more useful to you depending on your balance, deposit habits and how you use the account.
Cash Rewards v Interest Rates
One of the most common rewards at the moment is to offer new customers cash for switching. This is a bonus payment offered when you initially transfer your business to them. However, the interest rate on these accounts tends to be much lower. If you usually carry a low balance in your account or if you’re not in a position to save money regularly then these introductory cash offers can be worthwhile.
If you’re more of a saver and you carry a higher balance in your current account, a higher interest account is likely to provide more value long term. With some current accounts offering excellent interest rates for new customers, choosing the long term value offer over the upfront cash makes a lot of sense.
Managing Your Overdraft
Beyond the financially positive benefits offered by banks for opening an account, it’s important to take a look at the charges applied. Some people are regularly overdrawn, and if you’re one of them then you should pay more attention to the overdraft fees than the positive rewards.
There’s not much point in getting cash upfront of you’re going to be losing it quickly because of overdraft fees. Look for accounts that offer an interest free overdraft, then get to work on a budget to try to get out of the overdraft cycle. Once you’re managing your money better you can look to trade up to a financially positive current account.
There are also various accounts which offer benefits such as phone insurance, travel insurance and breakdown insurance as part of their rewards packages. These accounts tend to involve a monthly fee, but they can end up saving you money throughout the year.
Compare the monthly cost of these accounts with what you’re paying for these services with other companies. While they can be beneficial, they’re pretty much a waste of time if you don’t need them or can get them cheaper elsewhere!
You’re not strictly limited to banks most of the time either, with services like credit unions offering accounts if you’re in the UK. These services are non-profit organisations and are typically run to the benefit of the local community, and are becoming increasingly more professional as they become established.
If you’re struggling to meet the requirements of the major current accounts, such as failing a credit check, then credit unions can offer a great service. They generally offer loans and savings accounts as standard, but many now offer current accounts and even mortgages.
There are various sites which will show you the most up to date offers on current accounts, so the information is out there if you know what you’re looking for. Shop around for the best deal for your situation and put your account to work.