Money

How To Choose The Right Bank Account (for you)

By Loot | Thursday 16th May, 2019

The world of finance can be a confusing one. Interest, loans, APR and all that jazz can be pretty confusing if you have no idea what they mean. Jargon is unavoidable and we need to cut through it so that we get the right bank account. But which product will suit you?

Your financial and banking needs

When comparing bank accounts, you'll need to take a moment to understand your account and banking needs so you can effectively compare the many different features. In doing so, you get the best account at the best deal for you.

The current account is used by most people for their day to day banking. Traditionally, people have turned to high street banks or building societies but with the advent of the digital age, there are more options when it comes to how and what you use for your everyday banking needs.

Current accounts offer a range of financial services you could use, such as;

  • Paying bills using direct debit, standing order or the fast payment scheme (great for ad hoc or one-off payments)
  • Receive automated payments such as your salary or wages
  • Accessing an overdraft
  • Withdraw money from cash points
  • Pay for things with your debit card

To help keep your money under control, you'll want to be able to access your bank account via a secure app and...

  • Quickly check your account via the use of a secure app
  • Set up text alerts, to warn you when your balance dips below a certain point

Packaged accounts are current accounts but are paid for as they come with an array of additional features. You'll normally pay on a monthly basis. For example, for an extra fee of around £10 to £15 a month, you could access extra features such as travel insurance, mobile insurance and breakdown cover for your car.

A free basic bank account is worth looking into if you're unable to open a standard current account due to reasons such as a low credit score or limited credit history. Once you've had one of these accounts for a while, the bank you're with may allow you to upgrade to a current account.

You won't be able to get an overdraft on this type of account but you will still be able to receive automated payments for your salary or wages and set up a standing order and direct debit to pay bills.

Budgeting accounts are also called jam jar accounts or rent accounts. This is because they are designed to help you stick to a budget. They generally work by allowing you to divide your money across different 'jars'. You can decide how much money you'd like to put into each 'jar' by working out how much is left over for saving or spending once your bills have been paid.

They allow you to:

  • Pay bills using direct debit or standing order
  • Receive automated payments including salary or wages

However, these accounts often charge a monthly fee. You will likely need to go through a Credit Union or housing association, who may be able to pay the fees for you.

A jam jar account might be right for you if:

  • You want an account that helps you to budget
  • You rent a council or housing association property - in which case your landlord might pay the monthly fee for you
  • You want to avoid charges for refused direct debits

In effect, this traditional budgeting account is very similar to online bank choices such as Loot. There are no credit checks because there are no credit facilities offered with the account but you have full control over your money and your budget.

Bank account for students or graduates

Most banks offer specific student account products that have a large interest-free period, normally just longer than the average university course of three to four years. You can also have an overdraft up to an agreed amount to help you out too but be aware of the small print - it might be free whilst you are an undergrad but how expensive will it be when you graduate? They will probably offer you a really good deal initially to try and secure you as a long term customer.

Comparing account charges and features

Fees vary a lot between different banks, and one of the most common and highest fees charges is when you go over the agreed overdraft limit. If you regularly go over your overdraft limit, you'll need to sift through the small print to determine which banks charge the least. That said, it would be better to get to grips with your budgeting because once you fall foul of your overdraft limit, you'll be facing hefty charges which will ruin your budget even more.

Is it worth switching your bank account?

In summary, you are looking for a current account that...

  • Offers free every day, common financial transactions - e.g. direct debits, paying standing orders and so on
  • You'll be able to access your account quickly and easily, preferably via a secure app
  • Offers plenty of choices when it comes to being able to take money out of cash machines

And yet, many of us 'stick with' our current account because we think that swapping it to another bank or opting for a different way of doing things will be a hassle.

But this isn't the case, and not only could you save money when you move your current account from one bank to another, but you could also make money. Some banks, as an incentive, offer you cash for swapping. Providing this is the right move for you, you could be quids in.

Switching it up

Sometimes, it's not about finding a new bank but a new way of learning to manage your money. In effect, that's what Loot offers, a new way of managing money without worrying about sky-high costs or hidden fees.

Without an overdraft to give you a false sense of security, you are encouraged to use the money you do have in the best way possible. By tracking your spending, you'll know what you are spending your money on, giving you food for thought on how you can save money and spend less, whilst bulking up your rainy day savings and generally, being a financial ninja when it comes to your money.

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