Selecting a bank account is one of the most important financial decision you will ever make. Some people choose to keep the account at multiple banks, but most of them have just one main bank and don’t make any changes for years.
Finding the right bank for you is not easy, especially if you’re not an expert. Parking your cash in the wrong place can cost you a lot.
Before committing to opening an account, consider these factors to ensure you are making the right choice.
Times, when you had to pay banks to let them keep YOUR money, are fortunately already gone. It means you don’t have to pay any fees. Moreover, most of the banks have to offer at least one type of basic free account.
Banks often offer more advanced packages, which include some extras like insurances, free cinema tickets or access to airport lounges. You should consider if you really need these features, and if so is it worth to pay your bank for them, because you can often get the same stuff cheaper elsewhere.
Fees you should watch out for include monthly maintenance fees, ATM fees and the cost of using the overdraft. Remember, banks like to collect fees from their customers, so read the fine print.
Minimum Monthly Credit
Some banks have minimum balance requirements that can trigger fees. There are four primary types of requirements:
- Minimum monthly credit – the minimum amount you need to pay to your account monthly.
- Average monthly balance – balance, which must be above a certain requirement, on average, throughout the month.
- Minimum balance – your account must remain above a certain level.
- The minimum amount in savings – some banks may require you to keep a certain amount in savings.
Of course, many bank accounts have no minimum balance requirement. Whatever the case, make sure that any balance requirement suits your needs.
Maximum Interest (AER)
Another important factor is how much interest you can earn on your current account and deposits. Ideally, you are looking to generate high-interest income through saving accounts and some good interest on the current account.
Many banks don’t pay any interest on the current account at all. Some of them pay it just up to some limit. It’s always good to have hight AER, but sometimes it’s better to choose a bank, which pays no interest on the current account, but high interest on the saving account.
Overdraft fees are some of the biggest ones that hit consumers. If you are careful with your budget and don’t often feel money is tight, skip the overdraft and just make sure to keep a healthy balance in your account. If you’re living more paycheck to paycheck, overdraft might make sense for you. It can be used as emergency money.
If you think overdraft is essential for you, always check how fees are charged (it might be just some constant per cent, but it might be very complicated scheme).
If you’re travelling a lot, or even just making many abroad online shopping, you should always check the fees for foreign expenses.
Many banks take a per cent from every transaction make abroad (the so-called spread), some of them take the additional fee. Some of the banks will additionally charge you for every non-sterling payment.
It’s also usually cheaper to pay by card when you are abroad, but sometimes ATM withdrawals are also free.
Your bank should not charge you for withdrawing money, and when choosing your bank, you should consider whether it has a large network of ATMs. You should also check daily and monthly withdrawal limit, as some banks might set it very low.
If you travel a lot, try to find a bank, which won’t take any fees for abroad withdrawals.
Types of Additional Products Available
There are plenty of financial products available from most banks: loans, mortgages, saving accounts, income-generating assets. Larger banks may offer a wider range of products, but that doesn’t necessarily mean a better deal.
Some of the banks will offer you a better offer if you already have some financial products with them. However, never assume you must stay with the same bank for every product you own. If you can find a better rate on a mortgage at another bank, just do it. Don’t stick with your current bank because of the relationship you have with them. For bankers money they make on you is the most important factor. So it should be for you.
Ways to Bank
When it comes to banking, another key factor is accessibility.
Most consumers will want to take into account ATM location convenience, branch location convenience and the availability of online and mobile banking.
You should be able to check up on your account, pay bills and make deposits electronically, both at your computer and by using the mobile app.
If you are banking with an online bank, the service options available to you online or over the phone become critical. Are you going to be stuck in a phone tree for hours, or do they pick up your call immediately?
Some of the banks will offer you extra features to their accounts: free newspapers, cinema tickets, airport lounges access or insurance.
If you can get them for free (or you need to meet some requirements, like minimum monthly credit), that’s a great deal! But if you need to pay some extra fees for them, carefully consider if you really need them. It might occur that some of that stuff you can get cheaper elsewhere.
Read the Fine Print
Remember, banks like to collect fees from their customers, so always read the fine print!
Banks in the United Kingdom are required by law to publish so-called Fee Information Documents, where you can find a table with all fees you will ever need to pay. It’s also a good idea to always read Terms & Conditions documents, which may contain some useful information.
If you are not sure what to do, try to find help from the expert.
Choosing a bank account is not easy, but it’s one of the most important financial decision you will ever make.
Always try to take a look at these factors to ensure you are making the right choice:
- Minimum Monthly Credit
- Maximum Interest (AER)
- Overdraft Facility
- Foreign Expenses
- ATM Withdrawals
- Types of Additional Products Available
- Ways To Bank
- Extra Features
- The Fine Print
To help you make better financial choices, we created our UK Current Accounts Comparison Table. Try to use it and find what is best for you.