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Current Accounts

Choosing a current account - the most straightforward way of managing a your day to day finances - is a hugely important decision at a time when banks are so feircely competitive.

Remember that, in addition to paying bills, receive your monthly salary and make daily card transactions, your current account determines what kind of overdraft and debit limits you're allowed, and can therefore have a big impact if you live on a precarious "paycheque to paycheque" basis.

Types of accounts

What type of account you decide to open will depend both on your budget and requirements and, most importantly, your credit rating.

If you have a history of debt, for example, you are best suited to opening a fee-free bank account, which permit basic bill-paying facilities like Direct Debits and Standing Orders.

These types of accounts are also a good idea if you're a student or young person opening your first account, or if you simply only require basic bank services, and are confident you won't ever need an overdraft allowance.

More complex current accounts such as budgeting accounts are a good idea if you need some help dividing your money between what you spend on your weekly food shops, bills and mortgage and what you save, for example.

Providers

Banks are forever locked in a battle to one up each other, so the best thing to do when you're in the process of deciding your account provider is check out dedicated comparison sites such as Go Compare and Which?

Below is a brief overview of some of the major UK banks' current account terms:

BankOverdraft limitInterest rateFee
Nationwide£0.50/day5% AERNone
Tesco Bank18.9% EAR3% AERNone
Bank of Scotland19.89% EAR2% AERNone
Lloyds19.89% EAR2% AERYear 1 - £36
Santander£1.00/day1.5%Year 1 - £60

Note that the maximum overdraft limits, as listed above, can often only be used after a full year of banking - which means you have to ensure you stay on the straight and narrow during year one so you don't fall foul of the rules.

Keep one eye on other perks too, such as integration and cooperation with other accounts (for example, if you share a current account with a partner, choose a current account from which you can easily transfer money between the two).

Some utility providers also use Santander BillPay to help you easily settle outstanding balances - which is something else to bear in mindwhen it comes to choosing your provider.

Switching providers

At the moment, none of the above banks are advertising any significant incentives to switch providers, but make sure you keep an eye out for any good deals. Like phone and internet providers, current accounts are often apt to try and woo you with a superior deal if you're unhappy with your current one.

To keep up to speed on offers like these, stay tuned to the comparison sites and, if necessary, give them a call to discuss what you need out of a bank account - chances are they will have a perk or two you didn't know about that's perfect for you.

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