Current accounts are for everyday banking. You can use them to pay for bills such as your phone contract or Spotify and to receive your wages. Most current accounts give you a debit card which can be used to pay for things or to take cash out.
The types of savings accounts vary. Regular savings accounts can be used if you want to put money aside every month. If you want to access this money, some banks will allow this; however, some won’t- so it’s always best to check this out beforehand! Instant access savings accounts normally have lower interest rates compared to regular savings accounts, but they allow you to be more flexible with your money. Most will allow you to put money into your account whenever you want and take it out just as easily.
If you’re going to university, you can open a student account. The main difference between normal current accounts and student accounts is the overdraft, as some student accounts offer overdrafts of up to £3,000, interest-free. Interest-free means that you don’t pay any interest on your overdraft during your time as a student. Remember, your overdraft will still need to be paid back and if you go over your overdraft limit, you might have to pay additional charges. To entice students, most banks will offer you freebies, such as a 16-25 railcard or Amazon vouchers for joining. The freebies are great, but don’t just base your decision on what you can get for free!
ISAs (Individual Savings Accounts) can be used if you want to gain tax-free interest on your savings. There’s a limit on the amount of money you can save that will be tax-free, and it often changes every year. Like savings accounts, there any many different types of ISAs, they differ in their interest rates, ability to withdraw your money instantly and when you can add funds to your account.
Unlike a debit card, where you spend your own money, spending using a credit card involves borrowing money with the plan of paying that money back. The amount you can borrow and the interest that you have to pay back on top of that depends on what bank you’re with. If you pay off your bill in full at the end of every month, then you don’t normally have to pay back any interest. If you don’t do this, then you will pay interest on top of any outstanding balances. Because there’s a higher probability of getting into debt using credit cards, they tend to only be available for those who are at least 18 years old, with some banks requiring you to be 21.
Obviously, this is just a quick overview of the different types of bank accounts, if you require more information it’s best to contact banks directly!