A3 Current accounts
Different types, features, advantages and disadvantages, different services offered:
• standard
• packaged, premium
• basic
• student.
What are the main features of a bank account?
What different types of bank account are you aware of?
Do you have a bank account?
What do you use if for?
A current account is an account with a bank or building society that is designed for frequent use. Money can be paid in and withdrawn on a daily basis, without the need to give notice. Most people receive their wages in their current account. They are also used to manage most payments for bills and to store other incomes such as child benefits etc. This is a competitive market for Banks and each bank will offer different features and benefits to try and attract customers. The main features of a current account include...
Rate of interest paid on positive balance
Rate of interest charged on negative balance
Overdraft limit
Charges on unauthorised overdrafts
Additional incentives
There are 4 main types of current account:
Standard
This is the normal account offered to customers with a reasonable credit rating. It includes features such as the ability to pay and withdraw money, cheque-book, debit card, interest payments on positive balance and a pre-agreed overdraft limit.
Advantages
No charges on balance
Wide range of facilities including cheque book, cash card and overdraft
Convenient for receiving payments and making withdrawals
Disadvantages
No additional perks
High charges on overdraft facility
Packaged, premium
This account offers additional features to a standard account, for example car and house insurance, credit card protection, breakdown cover and cash back on certain transactions. The bank may have additional charges for these accounts so it is important to check that you are being offered a good deal.
Advantages
No charges on balance
Wide range of facilities including cheque book, cash card and overdraft
Additional perks such as holiday/travel insurance, break down cover and phone protection
Convenient for receiving payments and making withdrawals
Disadvantages
Monthly charge
May not meet customer needs or provide value for money to customer
3. Basic
This account offers only limited features designed for those customers who may otherwise find it difficult to open a bank account due to poor credit ratings. A basic account will not offer an overdraft and will not pay interest on positive balances.
Advantages
Available to customers with poor credit rating
Easy first step for individuals to gain access to basic banking facilities (deposit/withdrawal)
Can pay in money/cheques
Debit Card to pay in stores
Free to setup/use
Direct Debits/Standing Orders can be set up
Restricts spending as no overdraft facilities
Disadvantages
Limited facilities (No debit card or Overdraft)
4.Student
This account is designed specifically to meet the needs of learners. Common features include an agreed overdraft limit and incentives to join the bank, for example free rail cards or cash. Banks are keen to attract learners because once a young person has joined a bank they tend to stay with that bank for life. The internet is changing this as more information and comparison sites are available and it is becoming easier to change banks.
Advantages
Course fees and student loans can be easily handled
Bonuses offered aimed at students (Joining bonus/ Travel discounts)
Disadvantages
Overdraft could encourage overspending
Charges for overspending
Limited facilities
Using the sources below outline why you think Gabriella should open a student current account.
Which Student account is best for Gabriella? Justify your answer.
What would be your priorities when choosing a student account?
What do you think are the benefits to the banks of offering student accounts?