How to get the most out of your current account – and when to switch

Your current account is probably the one financial product you’ll use most days, whether that’s swiping your debit card, paying a bill by direct debit or carrying out bank transfers. It’s likely you’ll also receive your income into this account, whether that’s from your job, pension or rental income. 

There are around 75.6 million current accounts held by customers in the UK, according to market intelligence firm Mintel. However, the overarching label of “current account” hides the huge variety of options available. 

While there are standard accounts, you can get more elaborate options such as cashback perks, packaged accounts that come with added insurance extras, as well as specialist accounts for certain customers, such as students. 

Here, Telegraph Money takes you through the different types of accounts on offer and what could work best for you. In this guide we will cover:

• How to open a current account
• The different types of current accounts
• How many current accounts can you have?
• How and when should you switch current accounts?
• The best current accounts for 2023
• Why banks close current accounts
• How to get your money back after a scam

How to open a current account

Most high street banks offer current accounts to anyone over the age of 16 – some may have a minimum age of 18 if they offer features like an overdraft. 

Standard current accounts are usually free to open. Ways to open the account will depend on the provider – more traditional banks usually let you open an account in person at a branch, via post, phone or online. There are also digital challenger banks such as Monzo or Starling that will let you open an account quickly via an app. 

Regardless of how you open the account, the provider will need to see proof of identity – usually using a driving licence or passport – and proof of address, via recent council tax or utility bill. You’ll either have to take these documents into a branch, post a photocopied version of them or, in some cases, you can take a picture on your phone. 

For current accounts that come with an overdraft, you’ll need to have a credit check. Depending on your credit score, your maximum overdraft limit may be revised.

The different types of current accounts

Basic current account

There are around 7.3 million basic bank accounts open in the UK, according to government data. Since 2015, the UK’s nine biggest personal current account providers have been required to offer a basic account to customers who were not previously “banked” (that is, did not have any bank account) or did not qualify for the provider’s standard current account.

A basic account operates in the same way as a standard current account, allowing for deposits, withdrawals, debit card payments and standing orders. However, there are no other bells and whistles; it will not even offer an overdraft or a cheque book. There may also be limits on how much you can withdraw each day.

Standard current account

A standard current account allows you to make and receive payments. If it doesn’t come with any extra features, other than perhaps an overdraft, and as such it is usually fee-free. 

If an overdraft isn’t provided as standard, there may be the option for you to apply for one, or extend their existing limit (subject to a credit check).

It is important to understand the costs associated with any overdraft, as providers often charge high interest rates – around 40pc interest is common – for borrowing in this way. 

Banks may also offer packaged accounts for those looking for add-ons. Packaged accounts are the same as standard current options, but provide additional services such as insurance or commission-free currency exchange, for a monthly fee.

If you are tempted by a packaged account it is worth considering what add-ons you are looking for, and then checking whether you could get the service cheaper elsewhere. 

High-interest current account

High interest current accounts are, as the name suggests, accounts that offer interest on your balance. If you tend to transfer money out of your account each month, this might not be of much help – but if you tend to keep cash readily available then it’s an easy way to boost it.

Some current accounts pay up to 5pc, but often come with several caveats – such as requiring a certain number of direct debits, and paying a certain sum into the account each month. 

Nationwide, for example, offers 5pc interest on deposits of up to £1,500 and an interest free overdraft for 12 months on its FlexDirect account. After that the rate drops to 1pc.

Student current account

If you’re heading off to university, it makes sense to open a specialist student current account. You’ll usually benefit from a 0pc overdraft, which will help make budgeting easier, and many offer cash, discounts and other incentives to sign up – from travelcards to meditation app subscriptions.

It is worth shopping around to find the account that works best for you, with the perks you’ll benefit from the most. 

Student accounts operate in the same way as current accounts, apart from the interest-free overdraft. However, it’s worth remembering that a student account will likely convert to a graduate or standard current account once you leave university – after which time you’ll start paying interest on any outstanding overdraft debt.

Cashback current account

Cashback current accounts reward customers who make everyday transactions, such as paying household bills or making direct debit transactions. Some providers, such as Lloyds Bank,  reward customers further for shopping with partner brands, so it could be worth looking around to find out whether any offer deals with your most used retailers.  

Other providers, such as Chase, have a set cashback amount – Chase pays 1pc cashback – that applies to (almost) all spending.

In some cases, these accounts come with a monthly fee, so you’ll need to make sure the money you are likely to get back in rewards outweighs costs. 

Santander, Halifax and NatWest are among the providers currently offering cashback and similar reward accounts.

Santander’s Edge Up account, for example, pays cashback on both debit card transactions and direct debits up to £30 a month.

How many current accounts can you have?

There is no limit on the number of current accounts you can have. And there may even be benefits of having more than one account. 

For example, if you are a frequent traveller, having a current account that offers fee-free spending abroad, or one that comes with additional benefits such as travel insurance, may help you cut costs. 

Some people also find that using a separate account for everyday spending can help them budget, keeping cash separately to pay for bills and other direct debits.

It is also worth considering the risk of keeping all of your cash in one place. The Financial Services Compensation Scheme protects cash deposits up to £85,000 if your bank or building society fails. 

So if you have more than the limit sitting in one account it may be sensible to distribute so none of your money is lost if anything goes wrong.

How and when should you switch current accounts?

Switching a current account should be easy, thanks to the free current account switch service (CASS). This enables you to move from one current account with a participating bank or building society to another, in seven working days. 

Under the scheme, the banks take care of moving all of your outgoing payments such as direct debits and those coming in – for example, your salary – plus transferring any money in the account. 

In addition, any payments accidentally made into your old account will be transferred and the sender will be made aware of your new details. 

Only you can know when it is the right time to change accounts. Providers often launch switching bonus deals, usually paying a lump sum to new current account customers – while “free money” can be great, make sure the account also suits your needs before you switch. If you like to visit a bank branch, but the bank you’re thinking of switching to is only online, then it might not be a good fit.

The best current accounts for 2023

Best current accounts for children and teens

Equipping your child with their own account can be a useful way to manage pocket money without the need for cash, as well as teaching them the basics of good money management.

Most children’s bank accounts are free and offer features such as a payment or debit card, and apps to enable children to track their spending. 

There are restrictions on certain features; children’s accounts won’t offer overdraft facilities, for example, and some may allow you to add security functions, such as a daily withdrawal limit. 

Best current accounts for perks

What you’ll consider to be the “best” account perks will depend on your lifestyle and what features you use. 

Some of the best perks come with packaged accounts and, as we’ve mentioned, you might need to pay a monthly sum for these. 

Among the best offers include travel insurance, mobile phone insurance, breakdown cover, cashback, home emergency cover and fee-free foreign spending.

Best current accounts for travel

Travelling abroad can mean being stung by card transactions or currency fees. However, banks are getting better at tailoring their offering to meet the needs of their customers.

It is free to use your debit card abroad with Santander’s Edge Up account. Chase offers fee-free spending abroad, as do Monzo, Starling and Kroo. 

However, some providers have limits on things like foreign ATM transactions, so make sure you’re well aware of the terms before you go.

Best exclusive current accounts

While you need to look to private banks for the top echelon of current accounts, the high street has plenty of attractive premium offers.

HSBC’s Premier account, for example, is for those with an annual income of at least £75,000, or other considerable assets. It offers worldwide travel insurance and a £500 overdraft at 0pc – and there’s no monthly fee.

A Citigold account is expensive, costing £75 a month unless you keep at least £150,000 saved across UK Citi accounts. But the premier account offers significant perks, including the ability to spend and invest in multiple currencies without fees.

A number of other premium accounts have even better perks – if you’re eligible for them.

Why banks close current accounts

Instances of bank accounts being frozen or closed with little explanation often reach the headlines, and the process behind the decisions is still fairly mysterious. 

Banks use online databases and internal compliance teams to gather information on customers. This is standard practice, and a bank can shut a person’s account at any time, with limited notice, for a long list of reasons and are generally not legally required to say why. 

However, under the General Data Protection Regulation 2018, everyone has the right to ask an organisation, including a bank, whether or not they are using or storing their personal information. You can also ask them for copies of your personal information, verbally over the phone or in branch or in writing, through a “right of access” – otherwise known as a subject access request (SAR).

You can make an SAR request if you want to find out more about what personal information a bank holds about you, how it is being used, who the bank is sharing it with, and where it got your data from.

How to get your money back after a scam

If you think, or know, you have been scammed you should contact your bank immediately. 

Most banks have signed a voluntary agreement, where they’ll refund scam victims if your money cannot be retrieved – as long as you acted “appropriately”.  

You’ll either be offered a full refund, a partial refund or refused a refund, depending on the scam and whether you took reasonable steps to make sure you were paying the right person.

It can be helpful to write down a timeline of events, along with any screenshots of things like text messages, emails or letters if they were used as part of the scam.

If you think you’ve been unfairly refused a refund, there are steps you can take to address this – including contacting the Financial Ombudsman, or writing in to our consumer champion, Katie Morley.