An introduction to bank accounts

here are a range of bank accounts available, and it can seem like a complicated process to select the best product. Here is a brief introduction to some common kinds of bank accounts which can hopefully help you in your choice when you are researching the market.

The first consideration should be personal: what kind of customer are you likely to be? Before you are able to find the bank accounts most suited to your circumstances, you need to have a realistic picture of those circumstances.

Do you regularly need to make use of an overdraft facility to make ends meet? Have you on occasion breached your agreed overdraft limit? If the answer to these questions is: 'yes', then it is the structure of charges, rather than the interest rates on offer, that should drive your search for bank accounts.

The banks are interested in securing the business of all different types of customers, and so there are certain accounts that are designed for those with fluctuating incomes who may need the ad hoc credit facilities of overdrafts from time to time. The Alliance and Leicester, for example, offer 0% overdrafts for the first 12 months when you switch to their Premier account.

After the initial 12 month period is over, a fee of 50p per day is charged on overdrafts, with the fees capped at £5 per month. If you have an arranged overdraft of several hundred pounds, this arrangement provides quite cheap credit.

However, these kinds of account generally do not offer the best rates of interest - the benefit is the cheap overdraft facility. If you have a tight rein on your finances, and find that you never need to use your overdraft, you should look for the best in-credit rates of interest offered on bank accounts.

A note of caution: you'll find that those bank accounts that offer the best rate of interest usually have high charges for the agreed overdraft, and will hammer you with fees if you breach the agreed limit - you must be sure that you'll stay in credit for the gains on interest rates not to be wiped out by charges.

In addition to finding the bank accounts with the best interest rates, you should consider putting any surplus cash each month into a savings account if you wish to achieve the best growth for your money. Some of the best rates of interest come from savings accounts taken out in conjunction with premium bank accounts from the same provider.


John Finan is a retired banker and keen online contributor, he recommends looking at the bank accounts offered by Alliance and Leicester when researching the market.