Banking Defined

Why do I need a bank account?

You need a bank account so that when you start earning money there is a place for your salary to be paid into. A bank is a much safer place to keep your money than your home or your wallet. You can also earn interest if you put your money in a bank account. It's a good way of earning money as well.

What is a current account?

A current account is a standard bank account you can open which will offer you an overdraft facility, depending on how much credit you're able to be offered, and potentially a chequebook as well. A current account offers you more than just the basic bank account, which will only give you a cash card.

What is a basic bank account?

A basic bank account is the most basic form of account that you can open. It's designed for people who don't have a credit history, or who might be earning benefits and need somewhere for those to be paid. You won't be able to get a debit card, a cheque book or an overdraft facility for this bank account, so you can't go into debt, but you will be offered a cash card that you can use to withdraw money from an ATM.

What is a savings account?

A savings account is an account designed for you to store your money. It's not an easy access account, so the less you access your money the more interest you're going to earn on it. The more money that you put into your savings account the more money you earn on it.

What is a student account?

A student account is a type of current account that is designed specifically for students. This means that there might be extra features on the account, including a free overdraft facility for the first year that students are at university, so that they have the ability to access money before they're earning it.

What is a childrens account?

A children's account is an account that parents can open for their child. Generally speaking, a children's account is a type of savings account where the child can put a small amount of money that they do have aside and earn interest on that. It's a good way to teach the children about the very basics of banking.

Which sort of account should I open as my first bank account?

You are not going to have a lot of choice about which account you open when you first go into the bank. They may offer you a current account which will have an overdraft facility, a chequebook and a debit card. The bank may also offer you a packaged current account which will have a monthly fee on it, which you pay in return for certain benefits including travel insurance, home insurance, etc. It's important to insure that the price you pay for that first bank account is actually worth those benefits that you're going to receive.

How many different accounts am I allowed to have?

There's no real limit to the number of bank accounts you can have open. Banks will generally only allow you to open one type of account with them but there's no limit to the number of current accounts, for instance, that you can have with different banks on the high street.

Can I have lots of accounts open with different banks?

You can bank with as many different banks as you want to. As long as you pass the credit check and criteria for each of those banks, there's not reason why you can't have a current account with each bank on the high street.

What is an account number and a sort code?

An account number is a number that you will be given when you open your account. The account number specifies who you are to the bank and it's unique to you. A sort code is a number for the branch where you opened your account.

What identification do I need to open a bank account?

When you open a bank account, you need to provide several pieces of identification to prove to the bank who you are. That will include photo ID like your driver's license or your passport, and identification that proves where you live, such as a gas or electricity bill.

What should I do when I receive a credit or debit card?

When you receive your credit or debit card, it's very important that the first thing you do is sign that card so that nobody else can take it and use it as their own. Some banks will ask you to authorise your credit or debit card by phoning them, so you'll need to do that if they ask you to. Once you do have that card in your possession, you need to make sure that you keep it very safe at all times. If you do lose your credit or debit card, or it's stolen, you need to notify the bank immediately.

What is ethical banking?

Ethical banking is when your bank is only investing in countries and in companies that are involved in ethical practices. That can be anything from the bank being environmentally sound to having a good human rights record.

What are the big four banks?

The big four banks is a term that has traditionally been used to describe the four biggest banks in the UK. That was Lloyds TSB, HSBC, RBS-Natwest and Barclays. These days, there are also some other big banks including Halifax, Bank of Scotland and Abbey, but the term 'the big four' has stuck.

What is the advantage of banking with one of the big four?

There's no real advantage to banking with one of the big four. The UK has a really competitive banking sector. You should be able to find good products whether you bank with the big four, one of the small banks or one of the building societies. It's really just a matter of shopping around to find some accounts and products that suit you.

Do all banks have physical branches?

These days not all banks have physical branches. In fact, there are some banks, like First Direct, that operate entirely online

Do I need a bank with a branch I can go to?

There's no reason why you need to be with a bank with a branch that you can go into. As long as you're happy to be dealing with call centers and to be doing most of your banking online, there's absolutely no reason for you to go into a bank branch if you don't need to.

Are there risks in banking with a smalleronline bank?

The risks of banking with a smaller or an online bank are no greater than banking with one of the large banks with physical branches. All banks in the UK are covered by the Financial Services Authority, which means that if the bank goes bust then your money is protected.