Managing Money

Bank Accounts

Bank accounts help you to:

  • pay your bills;
  • receive money - such as your salary or benefits; and
  • keep track of where your money is going.

Bank accounts can also earn you interest on the money you have in the account.

We cover the three main types of bank account below. You might have any of these at different stages of your life.

Basic bank account – for managing day-to-day money. It doesn't usually allow you to go overdrawn by more than ten pounds if at all. We outline the basics here but for more information you can see the Basic Bank Accounts leaflet on the Money Advice Service publications page.

Current account - also for managing your day-to-day money, but with more features than a basic bank account. There are special accounts for children and students.

Savings (or deposit) account - for putting away money that you’d like to save, say for furniture, a holiday or emergencies.

How much does a bank account cost?

A bank account usually costs nothing, as long as you don't spend more money than you have in the account (called going overdrawn).

If you have money in your account (called being in credit), you are not usually charged for any of the services provided by your account, but do double-check by reading the terms and conditions.

Remember also that convenience cash machines which are not run or owned by the bank (such as those inside small shops, on garage forecourts, at railway stations and in nightclubs) may charge you between 1 to 2 pounds each time you withdraw money from them.

Opening an account

Once you've decided which type of account you want to open, you will usually be asked to:

  • fill in an application form;
  • provide proof of identity - you need to prove who you are and where you live (see below); and
  • pay some money into your account (however, some banks let you do this later).

Proof of identity

The law requires financial services firms such as banks to identify their new customers. The FSA do not set the rules on how firms should check identity - in most cases, firms will follow guidance produced by the independent industry body, the Joint Money Laundering Steering Group. This guidance sets out three options for firms asking new customers to prove their identity. See below.
Some firms will check databases such as the electoral roll and those kept by credit agencies. But most will ask you for documents. If you're asked for documents, the JMLSG Guidance sets out the following options:

Option 1.

A passport or photo-card driving licence; or combinations of certain official documents such as an old-style full UK driving licence plus a council tax letter or statement.

Option 2.

If you don't have these documents, a bank or other financial firm may be willing to accept certain documents relating to your particular circumstances, such as a: letter from a government department or local authority confirming a right to State benefits;
suitable confirmation of identity from a young person's workplace or educational institution; or a letter confirming a person's identity from a care-home manager or warden of sheltered accommodation or a refuge.

Further options are available for groups such as international students, migrant workers, refugees, asylum seekers, prisoners and those on probation. Details of these options are available in the JMLSG Guidance.

Option 3.

If you don't have any of the documents required, a firm may be willing to accept a letter confirming your identity from an 'appropriate person' who knows you, such as a social worker, doctor or teacher, indicating that you are who you say you are.

Which one is right for you?

There are so many banks, building societies and different types of accounts that it can be difficult to work out which one is right for you. A good starting point is to think about how important different features are to you. Would you prefer to talk to your bank face to face in your local branch? Or would you prefer to do everything by telephone or over the internet? Here's a list of things to consider. Print off this page and tick the features you want for easy reference.

Ways to run your account

  • Face-to-face contact at a branch
  • Phone banking
  • Online banking
  • Postal account for savings

Access to cash

  • Branch nearby
  • Cash machines nearby – and free to use?
  • Cashback facilities at supermarket, other shops or pub
  • Access at the Post Office

Interest

  • Amount of interest matters to me

Borrowing

  • Don't want an overdraft facility
  • Overdraft facility - is it free or are there charges?

Services

  • Cash card
  • Debit card
  • Cheque book
  • Direct debits
  • Standing orders

Restrictions

  • Any restrictions on withdrawals

Running your account

Usually there are three stages:

1. Paying money in

  • You can take cash and cheques made payable to you to your local branch, and complete a paying-in form.
  • You can pay in cheques made payable to you, by post.
  • Your account can receive automated transfers, such as your salary, paid straight into your account by your employer. This is known as payment by BACS and your employer will need your bank details to do this, including your sort code and your account number. You’ll find these on your bank statement, cheque book or card.

Keep your bank details safe and protect yourself against fraud.

2. Paying money out

  • Get cash out from a cash machine, at the supermarket and other shops (known as cashback), or at your branch. There is a limit to how much you can get each time.
  • Pay for goods using your debit card or by cheque.
  • Pay bills by direct debit, standing order, cheque, telephone or online banking.

The way we pay for things with credit and debit cards has recently changed. In the UK, we now use 'chip and PIN' for the vast majority of our transactions. Chip and PIN means your cards are better protected from fraud.
Make sure you keep track of how much money is left in your account, because if you go overdrawn you may be charged.

3. Keeping track of your money

  • Check statements from your bank and report anything wrong.
  • Check receipts or mini-statements from cash machines and report anything wrong.
  • Fill in cheque book stubs to keep track of what cheques you have written and who you've written them to.
  • Keep paying-in stubs until the money has arrived in your account.
    • Keep track of where your money is going and keep your bank statements in a safe place. You may need them for tax purposes.

It's a good idea to shred any personal data once you no longer need to keep it - this helps protect you against identity fraud.