Current Accounts Explained

The main purpose of a current account is to provide easy access to stored funds. They enable you to deposit monies which can then be withdrawn at a later date either directly, by direct debit or via a transaction. The majority of current accounts are available with a cheque book and debit card which can be used instead of cash to pay for goods and services. Additionally, many providers now offer the facility to access your account and move money online.

As the primary function of a current account is to allow transactions, most providers only offer low interest rates on balances. However, as an incentive to attract new customers, some now offer enhanced rates of interest, although the amount of funds to which these enhanced interest rates apply is usually capped. When choosing an account that offers a high initial rate of interest check how long the rate is available for as well as the rate at which interest will be accumulated after this. If it is specifically a high rate of interest that you are looking for, it may instead be advisable to use a function such as sweeping which will periodically transfer surplus funds from your current account and into a high interest savings account.

Many current accounts offer an overdraught facility which can be used to temporarily supplement funds. As overdraughts are a form of borrowing, the limit allowed will have to be pre-agreed with your current account provider, although some providers offer a small interest free overdraught as standard. To avoid penalties it is important to check whether your overdraught is applied automatically or whether you have to request authorisation. You should also check the associated interest rate applied to borrowed funds as well as whether the overdraught facility attracts any fees.