Current accounts form the foundation of personal finance. As this is the principal way to pay, receive and hold transient capital, it is not surprising that banks and building societies compete for your custom.
Providers know that funds held in current accounts are not just profitable but that customers can be lent money – from short-term like an overdraft to long-term like a mortgage – and sold a range of other financial products.
Current accounts are chosen for many different reasons. If simplicity is sought, there are several which offer no overdraft but have a debit card and ATM access and are fee-free. They include HSBC (Basic), Metro (Cash account), Nationwide (FlexBasic) and Santander (Essentials).
There should be no concern over using a bank with a foreign head office as it will have sought and obtained a deposit-taking UK banking licence. Therefore, accounts are fine with Bank of China, Helsinki-based Danske, Mumbai-based Icici and Spanish-owned Santander and TSB.
There are changes afoot, notably with Yorkshire Bank and Clydesdale rebranding as Virgin Money.
If accessing a branch is key, clearly the decision is likely to be one of the large banks although there may be surprises, such as the Swedish-founded Handelsbanken, which has over 200 branches in the UK, with 22 in Yorkshire.
Metro is the first new high-street bank in over 150 years. It was founded a decade ago and branches are open seven days a week, 362 days a year, usually from 8am-8pm but to 6pm on Saturdays and 11am-5pm on Sundays.
No-fee current accounts are still the norm. Packaged accounts which offer a range of services are likely to be withdrawn as the regulator, the Financial Conduct Authority, is unhappy with customers not being able to price the elements or opt out of products not required.
Some banks waive the fee if a particular balance is maintained, such as Brown Shipley with £50 quarterly but charged only if the average cleared balance falls below £5,000. Brown Shipley was founded in 1810 and became part of Luxembourg-based KBL Europe in 1992. It has a Leeds office.
Citibank, with its head office in New York, levies £75 monthly unless the average balance exceeds £150,000 or more across current and savings accounts.
Increasingly, providers require specific fresh credits each month for free accounts, notably Bank of Scotland (Classic with Vantage) £1,000, HSBC (Advance) £1,750, Nationwide (FlexAccount) £750 and Nationwide (FlexDirect) £1,000, or annually, as with Smile stipulating £6,000.
According to independent research by Moneyfacts, there are now several current accounts with modest charges which also require regular funding. On a monthly basis, they include NatWest and RBS (Reward and Premier Reward) £2 fee and £1,500 and Santander (123 Current) £5 and £500.
Another condition introduced in the last decade is to insist on a certain number of direct debit mandates to form part of the current account.
At least four are needed to receive interest with the Co-op (Everyday Rewards) and two with HSBC and Santander (123 Current).
Credit interest on cleared funds is low or not paid at all. The four notable exceptions are five per cent with Nationwide (FlexDirect), three cent with TSB (Classic Plus) and two fixed monthly sums of £5 with the Co-op (Everyday Rewards) and £2 with Halifax (Reward).
These are quoted gross and payments only come with conditions, such as up to £2,500 for 12 months with Nationwide, up to £1,499 and paperless with TSB, at least £800 monthly funding with the Co-op and minimum £750 monthly with Halifax.
Santander’s 123 account pays 1.50 per cent AER on balances up to £20,000 plus three per cent cashback on household bills paid by direct debit.
Another little publicised attraction of certain accounts is the ability to access a savings scheme which pays a higher rate than usual.
First Direct, the Leeds-based subsidiary of HSBC, pays 2.75 per cent AER on £25-300 monthly savings.
Bank names of yesteryear feature still on some accounts. The Royal Bank of Scotland (RBS), itself founded in 1727, acquired Drummonds in 1924, Williams Deacons in 1930 and Glyn, Mills in 1939. It took over National Westminster in 2000. This brought Coutts, founded in 1692, into its fold.
Drummonds has had such notable clients as the late Queen Mother. Barclays absorbed Martin’s in 1969. In its time, Martin’s had been innovative, offering the first mobile branches in rural areas and opening the inaugural cash machine in northern England.
Switching bank is no longer difficult. Just pop into a branch of your intended new one with two items:
proof of identity: full passport or driving licence
proof of address: current bank or building society statement or council/water rate invoice or utility bill, but not a mobile telephone one.
Metro Bank, the first of the recent ‘challenger’ banks, will accept applications both in branch and online. For the latter, it needs an email address, mobile telephone number, photo ID, three-year address history and a selfie photograph.
For six years banks have given a switching guarantee to complete the process within seven working days. The new bank will move payments across, such as for standing orders and direct debits, and will arrange for payments accidently made to your old account to be automatically redirected to the new one.
Rewards for opening are offered periodically. Presently, HSBC will give £175 after 30 days on both Advance and Premier and £75 on its Bank account. First Direct will pay £100 and is so sure new customers will stay that it offers another £100 parting gift provided £1,000 has been credited each month for half a year.
If likely to need an approved overdraft facility, look at allowances, charges and rates. Some have both a usage fee and a rate, such as NatWest with £6 monthly and 19.89 per cent EAR on its Reward account.
First Direct provides £500 overdraft subject to status with no charge on the initial £250 and at 15.9 per cent on the balance. It sends text messages to alert when likely to exceed the agreed limit.
Consider also the ‘buffer’ zone when the account may temporarily go overdrawn. Yorkshire Bank and Santander charge £25 and £12 respectively.
Do not overlook some potentially attractive current accounts offered by Cynergy Bank (Bank of Cyprus), M&S Bank and Starling.
The latter is a digital, mobile only bank which was started in 2014 by an ex-Allied Irish Bank executive.
For those with country interests, Weatherby’s Private Bank account has appeal. It charges £50 monthly but this is waived if assets, loans, deposits or investments are lodged with the bank and total at minimum £300,000.