What is a bank account?
Bank accounts are used by people to help organise their money on a day to day basis. There are many different types bank account which can be used for different situations.
People find bank accounts useful as they are a much safer way to store money than keeping cash under the mattress.
What can I use my bank account for?
Bank accounts are used for a variety of different reasons:
-To store money and accumulate savings
-To pay bills
-To receive money (like wages)
What are the different types of bank account?
Basic bank account – A basic bank account can be used for managing day to day money. Account holders will usually have a debit card that allows them to spend the money in their account at shops and online. Most basic bank accounts don’t have overdraft facilities, and some may not support direct debits.
Current account – A current account is also used for managing money on a day to day basis. Current accounts often allow overdrafts, which give users the buffer if they need to spend more money than they have in the account.
Current Accounts usually also support Direct Debits, which allow users to pay household bills like gas, water and electricity. Current accounts sometimes pay interest on credit, although usually not a great deal.
Some current accounts feature added incentives, which are usually paid for by a minimum monthly deposit or a monthly fee. These can include free mobile phone insurance, roadside assistance and travel insurance.
Savings account – A savings account is designed to store money on more of a long-term basis. Whilst some allow instant access, others require notice to be given to withdraw money.
Savings accounts pay interest on the money in the account, and users often use them to lock away money for a holiday or an emergency.
Sharia-Compliant account – A current or savings account which has been created to comply with the requirements of Islamic law.
How much does a bank account cost?
Most bank accounts are free, so long as the user has money in the account. This is because banks can earn interest on the money they hold.
Other accounts will charge a monthly charge for benefits like an overdraft, free breakdown assistance, travel or mobile phone insurance, and priority banking. These charges can range from £5 a month to £25.
Some accounts actually pay you money for depositing a certain amount of money into the account on a monthly basis.
Overdrafts can be free, but are often charged for, at either a fixed daily rate, or a preset interest rate.