by Simon Wright

Created on: January 19, 2012

Current accounts are the transactional bank accounts, through which bank customers undertake most of their day-to-day banking needs. In the United States, these accounts are referred to instead as checking accounts. Typically, a current account is needed in order for your employer to pay your salary into and will be used to take payments relating to your mortgage, loans, credit cards and insurance policies. It’s therefore a pretty fundamental part of any person’s financial portfolio. With that in mind, let’s look at some of the usual characteristics of a current account.

Access to a cash or debit card:

We sometimes take for granted the ease of buying goods or services in shops, over the phone, or via the Internet. Such transactions are facilitated via the availability of bank cards. The simplest type of bank card is a cash card, which just provides the ability to withdraw funds from a cash machine. Credit scoring is used to determine whether an individual qualifies for a debit card and these cards provide the additional ability to use the card to pay for goods over the Internet, over the phone, or by inserting the card into a card device in stores.

Access to an overdraft facility:

Subject to credit scoring, a current account customer may qualify for an authorised overdraft facility. This simply means that the person is permitted to take their balance below £0 provided that they don’t exceed the agreed overdraft limit. If the person sticks within their overdraft limit, then they will avoid unauthorised overdraft charges. However, the overdrawn balance will still normally be subject to a debtor interest rate.

Availability of standing orders and direct debits:

When you’ve opened your current account, you can then set up automated payment instructions on it. For example, many current account customers set up a monthly standing order to transfer money across from their current account to their savings account. For example, if I am paid on the 20th each month, then I might choose to set up a standing order for £100 to be transferred to my savings account on the 21st each month. Similarly, individuals can arrange for direct debits to be set up and these can be used to meet regular commitments such as mortgage payments, credit card payments, gas and electricity payments, etc.

Sometimes free, sometimes not:

There has been a longstanding tradition in the UK of providing current accounts that do not charge a monthly subscription

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