How To Adult – Current Accounts

How To Adult - Current Accounts

How To Adult – Current Accounts

At school, we are taught many things relevant to our education. But not so many things that prepare us for real life.  Sure, you might know the ins and outs of Henry VIII’s dating history (the original fuckboy), and everything there is to know about a triangle, but neither of those things are going to help you get a mortgage or fill in your tax return. I’ve had to teach myself all of the things I need to know over the years, so now I plan to share some tips that are hopefully easy to understand.

We are starting right at basic bitch level.  The first thing you will need is either your first current account or to switch your terrible current account to one that is better for your lifestyle.

How To Choose The Right Bank Account

For starters, you will need a current account with a bank or buildings society to manage your day to day money.  This will ensure you can pay bills by direct debit or standing order, receive automated payments such as your wages or benefits and pay other people online or by cheque.  You will also get a corresponding debit card.

Things To Avoid

Packaged Accounts – Some current accounts are called ‘packaged accounts’ that charge you a monthly fee and in return, you can get breakdown cover/insurance cover or other services. Personally, I would totally avoid these. The small print of the ‘freebies’ you get with the accounts usually renders them a ripoff.

Overdrafts – If you can avoid it, always say no to an overdraft. You know what’s a lot easier than getting out of debt? Not getting into debt in the first place. I’ve had to use mine before when I was really poor and it absolutely sucked. So start as you mean to go on and avoid them. If the money is there it’s so tempting to use it, so avoid the temptation.

Thing To Look For

Special Offers – I currently bank with First Direct as my main current account as they have great customer service.  But the reason I switched to them in the first place was because they offered £100 free to transfer to their bank. All you had to do was switch your direct debits using their service and pay your salary into your new account every month. And I got £100 free! Always check if a bank has an offer to attract new customers, but check if there are strings attached. Look beyond any short term offer and make sure that when it ends, the account will still be good value.

Are You In The Red or Black  If you regularly spend more than you have in your account you need to look for an account with an overdraft up to an agreed limit without charging fees or that has a low-interest rate.  If you’re careful and never go overdrawn (always aim for this) then look for accounts that pay interest on your credit balance.  If you’re somewhere in between then focus on the cost of banking charges rather than the interest.

Travelers – If you’re on holiday a lot or love ordering things from overseas try and find an account with low foreign banking charges for international payments, these add up quickly so finding a low rate will save you a lot of money.

Student Accounts

The difference between current accounts and student accounts is the overdraft facility. Some accounts allow overdrafts of up to £3,000 completely interest-free. This means you don’t have to pay interest on the overdraft  while you are a student. After you graduate you still have to start to repay the money and are likely to have to pay interest on it too.

Competition between banks and building societies is very high for students, and some offer ‘freebies’ in addition to overdrafts to tempt you such as rail cards.  My advice for those good at budgeting and not likely to go insane on Asos and spend the whole lot – is to to get the biggest and longest guaranteed 0% overdraft and not focus on the potential  freebies available, unless what is being offered free is worth a lot of money.

However, if you’re reading this guide as you are a mess with your finances, for god’s sake don’t go ham on the overdraft, remember you are going to be paying this back when you start work. How depressing will life be if you’re 27, all your mates are all in Marbs at a pool party and you can’t afford it as half your salary goes toward paying off that overdraft.    Whatever amount you end up wanting the overdraft for, look for the longest guaranteed 0% overdraft account you can find. Again you can trust Moneysavingexpert with some great tips and comparison links.

Side Note – Why Do Banks Love Students?

The honest answer is because they hope you’ve come out of school without having a clue about banking.  Why? So they can fleece you. At the end of the day banks are there to make money and you my student friend, have mug tattooed on your head to banks.  As soon as they sucker you in with that loan and overdraft you are stuck with them for years.  And they hope that you muff it all up and start missing payments and getting into trouble.  Because then they can sting you for more and more charges and make even more money. Be very careful as a student so you don’t mess your money situation up for years to come and you will beat those banks at their shady games.

How To Compare The Accounts

Ok, but how do you actually compare them all? Back in the day, I had to sit there with a bunch of leaflets reading different tables! Now you can easily compare them online.  I recommend Moneysavingexpert as one of the best online resources to find out which bank account is best for you.

Already Have A Current Account?

Having a bank account is like a relationship.  If you’re being mugged off you need to reassess whether it needs to be cut off.  I recommend picking a month and every year, in that month, have a think about your current banking situation.  Is your bank any good? Are you happy with the rates?  Have the rates changed without you realising?  Have they done anything bad in the last year?

It’s worth checking how your account shapes up using a comparison website after you’ve had it a while.  If you do  want to switch banks it’s really easy.  Banks offer a free 7 day Account Switch Service. It’s backed by a guarantee so if anything goes wrong you’ll be refunded.  This includes any interest and charges on your old and new accounts.

I plan to post about budgeting next.

Please comment below any other things you want me to post about.