Comparing Current Accounts And Savings Accounts

By Author: Lucy Carter
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There is undeniably a huge variety of savings and current accounts available in the UK marketplace. While having options is a good thing, this can make your decision on what is best for your personal finances difficult.

To make your selection easier, the following guide outlines the differences between current and savings accounts, as well as some important factors to consider when shopping around.

Current Accounts

One of the most popular types of accounts offered by banks and building societies, current accounts are perfect for the convenience of having your cash on hand whenever you need it. Your money can be deposited or withdrawn from the account anywhere, anytime, and without penalty. You can also choose a range of methods for accessing and using your funds, from cash machines and checks to direct payments online or at retail outlets with your debit card.

This type of bank account normally offers added features to make your life even easier, such as direct debits so you never have to worry about missing payments, an overdraft facility for those times when your expenses outweigh your actual funds ...
... and online banking for fuss-free, 24/7 transactions.

Savings Accounts

A savings account is ideal if you primarily want to squirrel away your money rather than spend it. The main feature offered by this type of banking is giving you high interest payments on the sum you accumulate. This rate varies notably depending on the bank and type of account you opt for.

Your choice of savings account type will depend on what you intend to do with your nest egg. For example, some savings accounts allow you to access your money at any time without penalty (although there is usually a limit on how much you can withdraw). Others require you to leave the money in the account for an agreed length of time before it can be withdrawn, meaning if you foresee needing emergency cash this would not be your best option. My article titled Easy Guide on Savings Accounts describes in more detail the different types available to you.

Important Banking Factors

Whether you decide on a savings account to help you squirrel away your money or a current account to primarily spend it, both types of banking have certain factors to keep in mind when shopping around and comparing different providers:

Fees and Minimum Balance

In addition to looking at the price charged to establish an account with a bank, watch out for the extra fees charged for the services they offer with it - while it might be tedious, taking the time to read the fine print will help you make the best overall choice. It's also important to be aware that some banks make it mandatory for you to keep a minimum balance in your account, especially when it comes to savings accounts.

Interest Rates

Some current accounts pay interest on your bank balance, but if this is a factor you're very keen on, a savings account will be more suitable to you as attractive interest rates are one of their a primary features.

Lifestyle

This factor is key in deciding the bank or building society that will best suit your needs. If you have mobility issues or simply prefer a personal touch, it will be crucial to find a bank that has convenient local branches. On the other hand if you prefer to manage your finances online or over the phone, location will not be a factor and you might end up finding a cheaper deal offered on the internet.

Conclusion

The above guide will help you decide whether a current account or a savings account will be most suitable to you. Most importantly, making the right choice depends on being clear about exactly what your financial needs are - this will allow you to target and compare the banking options that fit you best.
Sean Raston is an economics student and personal savings expert