CeFS – Unit 1 – Financial Capability in the Immediate and Short Term
Topic 4 – Everyday Banking 100% Sheet
Choosing a Current Account Youth Accounts Student/Graduate Accounts Premier Accounts
Most adults use a current account for their A basic current account suits people who These accounts are variations on the Premier accounts are designed for
everyday banking needs, such as receiving wish to avoid borrowing, such as those standard current account tailored to the wealthy customers and offer a range of
payments, storing money for short periods living on benefits or low incomes or needs of students in higher education additional services, such as a personal
of time, making payments and accessing people who have not held a current and recent graduates. The key features banker to help account holders manage
cash. There are current accounts designed account before. Customers who have a are a low interest or no-interest their finances and banking products.
for people aged 11 and over and others basic current account cannot get into overdraft facility and incentives such as Account holders have to have a certain
that are only available once people are 18 debt because this type of account does discounts on contents or travel insurance level of income and /or funds to save or
because they include overdrafts. Young not offer a debit card, an overdraft or a policies. Providers wish to attract invest to be eligible for premier accounts
people often use a savings account for cheque book. Most basic current students to their current accounts as – for example, earnings of £75,000 or
everyday banking because their main accounts can be operated free of charge; some will be high earners in the future. more. According to the OFT report, only
requirements are to store money and however, people with a history of fraud 1% of UK current accounts are premier
withdraw cash. or who are bankrupt may need to pay a Interest Paid when in Credit accounts.
set-up charge and / or a monthly
service charge. People operate basic There are usually conditions attached to
Types of Current Account these current accounts, such as paying Opening an Account
current accounts using cash cards or
standard current accounts, offering a full pre-paid cards. Pre-paid cards can be in a minimum monthly amount, keeping Before anyone can open any new
range of payment methods including loaded with funds from the account and the account in credit, or banking online account, including a current account,
debit card and cheque book; then used to make purchases anywhere or by telephone. Interest is paid on they must supply the provider with proof
packaged accounts, which charge a fee for that the card brand is accepted. Most balances between certain minimum and of their identity and address. This
offering additional services such as basic current accounts offer direct debits maximum amounts. There may also be requirement is designed to prevent
travel insurance; and standing orders to pay bills. fees for holding the account. People who money laundering and is set out in the
basic bank accounts, which offer a cash usually have a budget surplus may find Money Laundering Regulations 2007.
card only and no overdraft or cheque these accounts suit their needs. Caution Money laundering is the term used to
book; Standard Current Account is required, however, as going describe the ways in which hcriminals
student accounts; A basic current account suits people who overdrawn on these accounts can incur can use accounts to hide the source of
youth accounts (for people under 18 years wish to avoid borrowing, such as those charges that are greater than the their funds. These are usually accepted
old); and living on benefits or low incomes or interest or reward paid. as proof of identity:
premium accounts (for wealthy people who have not held a current gas, electricity, water or phone bill that
customers). account before. Customers who have a Joint Accounts is less than three months old;
basic current account cannot get into council tax bill issued within the current
debt because this type of account does Joint current accounts are held by two or financial year;
Basic Bank Accounts more people. Most types of current
not offer a debit card, an overdraft or a driving licence issued in the UK (photo
A basic current account suits people who cheque book. Most basic current account can be held in joint names. Joint card and full paper counterpart with
wish to avoid borrowing, such as those accounts can be operated free of charge; accounts suit people who share finances, current address);
living on benefits or low incomes or people however, people with a history such as married couples and those in current passport;
who have not held a current account of fraud or who are bankrupt may need civil partnerships, and people sharing a employer’s ID card if the employer is
before. Customers who have a basic to pay a set-up charge and / or a rented home. known to the provider;
current account cannot get into debt monthly service charge. pension or other social security book;
because this type of account does not offer People operate basic current accounts Packaged Accounts medical card;
a debit card, an overdraft or a cheque using cash cards or pre-paid cards. Pre- HMRC documentation;
book. Most basic current accounts can be Packaged current accounts offer account
paid cards can be loaded with funds holders extra benefits for a monthly fee. Insurance certificate issued in the last 12
operated free of charge; however, people from the account and then used to make months; or
with a history of fraud or who are bankrupt Benefits may include mobile phone and
purchases. anywhere that the card brand travel insurance, car breakdown cover. mail order statement that is less than
may need to pay a set-up charge and / or a is accepted. three months old (BBA, 2009).
monthly service charge. The fee can vary between 2 and 20
pound per month.
Switching/Closing Accounts
CeFS – Unit 1 – Financial Capability in the Immediate and Short Term
Topic 4 – Everyday Banking 100% Sheet
Monitoring Transactions Providers offer a free service for
switching between accounts at different
It is important that people check their
providers. This is discussed in more
current accounts to ensure they have
detail in Topic 7. They also offer a free
sufficient money to pay transactions that
switching process between accounts
are due, that they are keeping to their
held at one provider – for example,
budget and that mistakes have not been
students may switch from student
made. People can use statements that are
current accounts to graduate accounts
provided online, on paper and via ATMs to
at the end of their course and from
monitor their transactions. Statements are
graduate accounts to standard current
usually provided once a month for current
accounts after about three years.
accounts, unless very few transactions are
People who want to close their current
made, in which case they may be provided
account can do so at any time and at no
less frequently.
cost, although they must pay any fees
Statements often use abbreviations to
and other money that they owe. They do
describe transactions. According to the
not need to give a reason, although
British Bankers’ Association there are no
many providers will ask, for marketing
standards for statement abbreviations and
research purposes. People need to
each provider can devise their own (BBA,
return their payment cards and cheque
no date). For example, money paid in by
books when they close their account.
electronic transfer may be referred to as a
The provider may need to delay closing
DC (direct credit), Bacs transfer (Bacs is
the account if there are automated
the central payment system used to
payments due or cheques written on the
process several different types of
account that have not been presented
electronic payment, especially direct
for payment. People will need to tell the
credits) or BGC (bank giro credit). Direct
provider where to pay the balance on
debits may appear as DDR, DD or BD.
the account – for instance, by a cheque
Providers usually explain the codes on the
made payable to the account holder or a
statement and / or on their website or
transfer to another account.
current account literature. Cheques will
Sometimes a provider will close a
usually appear as the number of the
current account, for example if the
cheque. It is therefore very important that
customer no longer meets minimum
people write the details of the payee on
deposit criteria. In these cases the
their cheque books so they know where
provider must give at least two months’
the money has been paid.
notice.