The Basics of having a Bank Account

Everyone should have a bank account. It’s a much more secure way of looking after your money than stuffing your cash into a mattress, and you can earn interest on your money. However, there are still many people who don’t have a bank account, as this quote from the Financial Services Authority shows:

‘Fear of banks and of being seduced by easy access to credit are some of the main reasons why more than a sixth of the adult population does not have a bank account ….. Other reasons include a misunderstanding about the documentation needed to open an account and the idea that you have to be employed before you can have one.’ (Source: )

In this article, I will provide information that hopefully will help overcome any fears about opening a bank account and answer some of the questions that you may have.

For someone approaching a bank for the first time, it’s useful to know what types of account you should open. Your first priority should be to open a checking/current account, as a means of having money paid to you and withdrawing money. Some of the key features of current accounts are:

– you will be paid a little interest on any positive balances that you have.
– you will normally get either a cash card or a debit card to enable you to withdraw money from a cash machine. (With a debit card, you can also make payments in shops)
– You may be able to open an overdraft facility, which will enable you to benefit from short term borrowing although you will be charged interest on the amount borrowed.
– And you may get a chequebook, meaning that you can pay for items by cheque.
– Charges will apply if you exceed your balance limit. And some accounts charge a monthly subscription fee for having the account, especially in the US.

For those who are concerned about succumbing to the temptation of credit, there are basic banking accounts that don’t allow you to become overdrawn.

The other type of account that you should have is a savings account. Usually an instant access account is desirable so that you can get immediate access to your cash if and when you need it. The benefit of a savings account is that you will get a much higher interest rate than you would on your current account. Savings accounts are very straightforward with no overdraft facility.

If you’re a student, graduate, or are under 18, then you may find that banks offer specialist accounts aimed at your customer segments. These may include benefits tailored to your lifestyle needs.

Banks websites are a good source of information if you want to do some preparation before choosing your account. As with most things in life, it pays to shop around to make sure you’re getting a good deal. Banks also offer brochures that you can pick up in their branches that will help explain their accounts’ main features.

Armed with this preparatory information, you should now be ready to apply for an account. You can do this either by visiting a branch or online. As the FSA quote indicated, you don’t need to be employed to get a bank account. And, if you choose a basic bank account (with no credit facilities) or a savings account, then you won’t need to be credit scored either. It should just be a case of providing some documentation to help the bank prove that you are who you say you are. Typically, they will ask you to provide your driving licence or passport, plus a bank statement or utility bill, so it’s worth bringing these items with you if you’re visiting a branch.

I mentioned credit scoring and it’s an issue that can cause alarm. Where people apply for accounts that include credit facilities (such as an overdraft), banks require to check that the person is suitable to lend to. You have probably read about the sub-prime lending crisis that has recently affected the banking industry, where banks have made bad decisions on who to lend to. It is in everyone’s interests for banks to lend sensibly and that means that there may be times when people get turned down for credit facilities. The good news though is that you should still be able to get an account – it will just not include an overdraft or debit card. And you can always reapply for these facilities at a later date, having proved to the bank that you ca manage your finances well. (It’s normally recommended that people wait at least 3 months before reapplying for credit).

I can’t imagine not having a bank account. For starters, it’s a basic requirement for my employment. Most employers will only make payments into a bank account. It also makes life so much easier when it comes to purchasing goods, or holidays, and it enables me to get the most from my money by getting interest on my savings. I can remember, too, the first time that I had to open an account. It did feel daunting, mainly because I was aware of how little knowledge I had of the process. You at least have the benefit of sites such as Helium and have the chance to browse bank websites before you set foot inside the bank hall. Hopefully, like me, you will find that the bank staff are friendly and helpful and that the process of opening that first account will be fairly pain-free. Good luck.