Current accounts a glossary of terms
Getting your head around all of the terminology related to current accounts is crucial if you want to make sure that you get the best ones on the market.
In This Guide:
- Internet Current Accounts
- Basic bank accounts
- Credit rating
- Current accounts
- Ethical bank
- Premium current accounts
- Savings accounts
- Student current accounts
- Youth bank accounts
Internet Current Accounts
These are current accounts offered by banks that are based solely online, without any in-branch presence whatsoever.
The annual equivalent rate, or AER, is the rate at which you earn interest on the balance of your current account.
You’ll also, generally been given a separate AER that applies to the interest you’ll be charged if you are to go overdrawn.
Basic bank accounts
Basic bank accounts are simplified current accounts designed for people with poor credit ratings. They will generally offer basic features, allowing you to deposit and withdraw cash and use a debit card but won’t usually allow you to go overdrawn.
Some of the most basic basic bank accounts will offer you some extra features like access to an overdraft if you pay a little bit each month for the privilege.
If you have a positive balance in your current account then you are ‘in credit’.
Your credit rating is like your financial footprint; it is a record of your dealings with various types of credit and any bills in the past and allows future creditors to assess your eligibility to use their products.
Current accounts are your simple bank accounts that allow you to make transactions using a debit card and deposit and withdraw cash easily.
Most current accounts will offer some kind of overdraft facility.
Ethical banks are banks who conduct themselves in a restricted manner according to a strict ethical code.
This can take the form of withholding investments from businesses that they consider immoral, or it could take the form of more positive action intended to improve the environment or society.
An ISA is essentially a savings account but where the interest you earn is tax-free. There is a limit on the amount that you can deposit in an ISA each year which for the 2015/16 tax year is at £5,240.
An overdraft facility allows you to continue spending money even when your current account balance falls below £0.00. Most of the time you will be charged interest on the amount you go overdrawn, but some banks offer current accounts with interest-free overdraft facilities.
Premium current accounts
Premium current accounts offer various benefits to their holders in exchange for a monthly fee.
These benefits could be anything from free travel insurance to a Netflix subscription and the monthly charges range from around £5 to £25.
Savings accounts are bank accounts designed for you to leave your money stored away for extended periods of time and earn you higher levels of interest than you’d get from a current account.
Unlike current accounts, savings accounts won’t come with debit cards.
Student current accounts
Student accounts are designed for those in any kind of higher education or undertaking any kind of degree or degree equivalent qualification.
They generally come with an interest-free overdraft and often other free extras like railcards or Taste cards.
Youth bank accounts
Youth accounts are simplified current accounts designed for younger people.