After we open a bank account with one of the banks 95% of us never change our bankers! There could be lots of reasons for this but it’s almost certain that all of that loyalty doesn’t come from complete customer satisfaction!
Young people, especially those under 18, are just the type of customers that banks are looking for. Whether you are a student at school, going to university or embarking on a career the banks will be falling over themselves to ensure that you sign up with them. If you are going to university most banks have student accounts that have a host of special offers. Even if you have an account which was opened while you were at school it will still be worthwhile investigating what is on offer on the high street or on the Internet. If you are going straight out to work or embarking on a gap year after you leave school think carefully about what you will need your bank for. Don’t be afraid to ask questions and make sure that you look at the fine print written into the deals before you commit yourself. Outlined below are tips for opening different accounts for different types of young people. Check them regularly – they are changing all the time and the best deal one week won’t necessarily be the best deal the next.
Before you are able to open any account you will need to prove who you are, where you live and where you work or go to school. Your bank will ask you for different types of documents as evidence for these things. These are likely to include:
Of course you may not have some of these but don't worry - your new bank won't want all of them and they will help you in explaining what documents are suitable.
It is well worthwhile opening a bank account long before you think about going to university. You will probably best be served by an instant access savings account. Whilst you won’t get a cheque book, debit card, overdraft or a credit card, it will get you into the swing of having your own account, pay you some interest on your savings, get you used to saving and most importantly, will be a great starting point to getting off to a good credit rating as soon as you are 18.
Look for an account with:
These are offered by at least nine high street banks. They are available to you as soon as you have an unconditional UCAS offer. The sort of things that they will offer you are:
You probably won't be offered a cheque book but you will have a debit card and access to online banking.
This all looks good but you must BE CAREFUL!
WizeLinks to Student accounts offered by:
Regular current accounts
This will be the mainstay of your financial life. You must have a very clear idea of what you want from your current account. It will come with a cheque book, debit and credit cards and access to online banking.
The type of questions you need to ask yourself are:
There are probably many other questions that you can think of. Don’t be afraid to ask them before making up your mind.
Depending on the answers to these types of questions you should go in search of the right account for you.
Once you have made up your mind
Wizelink to current account comparison site
As the name suggests these accounts do not give you the facility to go overdrawn, nor do they have a debit or credit card attached to them. They are not designed for you to take money out of on a regular basis and they might penalise you if you withdraw money too often. They will pay you a much higher credit interest rate than a current account – which probably pays you nothing at all. Be careful though because most accounts will pay you your interest net of tax – that means that they take the basic rate of tax (currently 20%) off of the interest before paying it to you. This is fine if you are working but not so good if you are not – or if you are earning less than £7,500 per year. You will be able to get the tax back but it’s a rather long-winded process. Ask if there are any accounts which pay you gross interest – that means that no tax has been taken off of the interest before it is paid to you.
Paying From Your Account
These will be available online or they can be sent in the post to you each month. Some banks now charge for postal statements. Ensure that you check them carefully and keep a file of them for a least two years for future reference. You will also be able to access on-line statements at any time. You may find quite a few abbreviations on your statement. There is often an explanation to the abbreviations on the reverse of your statement. Some of them are shown below.
APR - Annual Percentage Rate (relates to credit interest).
BBP - bill payment.
BGC - bank giro credit.
CAT - a standard applied to ISAs that stands for reasonable Charges, easy Access, fair Terms.
CDL - Career Development Loan.
CHAPS - Clearing House Automated Payment System (a means of transferring money).
DDR - Direct Debit.
DR - debit balance (overdrawn).
IBAN - International Bank Account Number (you can find this on your statement).
IMO - International Money Order.
ISA - Individual Savings Account.
REM - remittance: a cheque credited to your account that was not paid in at your home/own account-holding branch or bank.
REV - reversal: a standing order or Direct Debit has been recalled.
STO - standing order.
UNP - unpaid.