Bank Accounts

What it is....

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:

  • Passport
  • Full driving license
  • A Utility bill
  • A letter from your school or employer
  • A pay slip

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.

Pre-university accounts

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:

  • no monthly fees.
  • access to online banking.
  • High credit interest rate paid ( gross interest if possible – that means you won’t be paying tax on it).
  • As you won’t be allowed to run an overdraft,  interest rates are unlikely to be of much importance to you..
  • There may also be the odd freebie thrown in, but these are much more likely to be offered when you are 18.

Student accounts

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:

  • 0% interest on pre-arranged overdrafts.
  • The amount you will be able to go overdrawn will increase over the course of the three years or so, that you are a student but the maximum amount will differ from bank to bank.
  • Credit Card
  • Online banking
  • Freebies such as:
    • Free phone/gadget/laptop insurance.
    • Commission free foreign exchange for holidays.
    • Discounts on AA (Automobile Association) membership.
    • NUS ‘extra’ card.
    • Free YHA (Youth Hostel Association) membership.
    • Free music downloads.
    • Mini ipod speakers.

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!

  • Check what the bank charges are if you happen to go over your pre-defined overdraft limit.
  • Check what other bank charges might apply.
  • Make sure this doesn’t happen by using the online banking facility regularly and BUDGET!
  • This is great opportunity to begin to build a good credit rating. Use the account responsibly and you will be rewarded handsomely when you finally leave college and begin to submit new credit applications. Use it poorly and any thoughts you might have about getting a decent car loan or some other type of finance might well go up in smoke.
  • When you leave university the preferential rates that you have enjoyed as a student will begin to disappear, probably disappearing altogether a year after you graduate. Be prepared to switch your account and look out for other deals  more suited to your needs.

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:

  • Are you likely to need an overdraft facility?
    • If so how much?
  • Will the overdraft be there for any length of time?
    • If it is it might be better to consider a bank loan rather than an overdraft.
  • Will you have relatively large credit balances sitting on your account for any period of time?
    • If so it might be worth looking at opening a high interest saver account and running it alongside a current account.
  • Will you need a sole account or a joint account with your partner. Remember, if you choose a joint account then any mistakes made by one person could well affect the others credit rating.
  • Do you need a credit card or charge card?
  • What card limit will you need?
  • Will one card be sufficient for your needs?

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.

  • Don’t just go into one bank and ask them what they have – remember, they will only offer you their products. Whilst they might be very good they might not match the best product that’s available on the market.
  • Get on the internet and do some research before going into the high street. All of the different accounts might seem confusing at first but after a few minutes things will begin to become clearer.

Once you have made up your mind

  • BUDGET! This will help stop you making expensive overdraft mistakes – both monetary and damaging your credit rating.
  • Use the online banking facility to keep track of the ins and out of your account.
  • Keep an eye open for new deals in the market. Remember the banks are looking after YOUR money and giving YOU a service. If you don’t think you are getting a good enough deal – CHANGE!

Wizelink to current account comparison site

Savings accounts

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

  • Cheques
    • Come in books of thirty along with paying in slips - to pay cash and cheques into your account.
    • You have to fill in the payee (the person or company your are paying), the date, the amount your are paying in words and figures and sign it.
    • Failure to do any of these bits properly means that the cheque won't be paid.
    • A cheque may take from 2 to 5 working days to clear (the money paid).
  • Direct Debits and Standing Orders
    • These are set up on your current account in order to pay regular bills. Normally you will be able to set either of them up online. If you have any problems you will be able to phone your bank for help in doing this.
    • If you set up a direct debit for a company, the company will approach your bank each month (or whatever the agreed interval is) and ask for a sum of money. This amount may vary from month to month. Provided you have enough money to cover it, the amount is paid to the company. This is typically used to pay your bills each week, month or year, or anything where the amount varies from period to period. You will need the account details of the company with whom you are setting up the direct debit.
    • If you set up a standing order for a person or a company the same amount will be paid into their account each month (or whatever the agreed interval is) on exactly the same day as long as you have enough money in your account. This is typically used to pay mortgages, or anything where exactly the same amount is paid each month. You will need the account details of the person or company you are trying to pay.
  • BACS payments
    • These are one off payments made directly from your account into the account of the person you are trying to pay. You will normally carry these out using your online banking. You will need the account details of the person or company you are trying to pay.

Online banking

  • This where you have access to your account from your computer using the internet through your bank’s website.
  • You will be issued a username and password in order to get into your account.
  • You will be able to check your balance, look at your statements, make one off payments and set up standing orders and direct debits.
  • Many of the banks now use a card reader to ensure that your bank account is secure. This involves putting your credit or debit card into the card reader, entering your pin and following a set of onscreen instructions.
  • When using online banking, make sure that your keep pin numbers and passwords secure and change passwords regularly.
  • In order to access your account and make new payments you will probably have to use a card reader. It will look a bit like this. You will notice that there is a slot in the top where you put your debit or credit card.

  • When you have put your card in the reader will prompt you for your PIN. Once you have entered it you can begin to start using the reader. You bank website will give you a code which you will have to enter into the reader. When you have done this and pressed enter the reader will give you another code which you must enter into the website. As long as all the code are accepted you will be able to access all of the functions of your banks website for you account.
    Although this may seem a bit long winded, it means that your account is much better protected than if you didn’t have to go through these steps.

Bank Statements

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.

Wize Tips

  • Think about what you need from your account
  • Do some homework before you go into the high street
  • BUDGET!
  • Keep within your limits
  • Have enough funds in your account to cover out goings
  • Don’t sit on large credit or debit balances. Use a savings account or organise a loan.
  • Use online banking regularly to keep an eye on your account.
  • Check your statements regularly and thoroughly.
  • Use the internet to find out what else is happening at other banks
  • Don’t be afraid to move if you can get a better deal