What you’ll need to open a bank account

To open a bank account is often relatively easy – but it may be even more so if you’re prepared in advance.

Bank accounts

In the modern world it’s not easy to manage your finances without a bank account.

In fact, many aspects of modern life are now built around the assumption that you have one.

For example, the majority of employers will no longer pay by cash but only via bank transfer or cheque – meaning you’ll need some form of bank account to get paid.

Of course, you may wish to open a bank account even if you already have one or indeed several.

It could be that you’re simply looking for a more attractive deal or more facilities than you’re currently getting from your existing bank.

How to go about it

The first thing you’ll need to do is to consider what sort of account you’re looking for.

Perhaps the most common is the current account. Many people regard this as their everyday working account and it may bring with it a chequebook and plastic debit card etc.

There are also many other forms of more specialised bank account including things such as savings accounts which pay a more attractive rate of interest on money you have in credit balance etc.

Once you’ve decided what sort of account it is that you’re looking for, you’ll then need to think about what bank or building society you’d like to open a bank account with.

That involves looking around to see what offers and account types are available and which appears to be the closest to your needs.

To open an account

Once you’ve made your decision, you can apply to open the account.

What happens next may vary depending upon the bank concerned and your situation but it’s important to keep in mind the following:

• banks are now obliged by regulation to verify the identity of their account-holding customers – if you are not already known to the bank this will involve you in proving your identity and place of residence.

This is required to avoid criminal activities such as money laundering and applies to everybody – you are not being singled out!

Applications can typically be made online and take only a few minutes. You’ll typically need to provide:

• your full name;
• details of your employer;
• your address details for the past 3 years;
• your national insurance number.

If you’re unemployed or a foreign national without a NI number, you should speak to the bank for specific advice relating to your situation.

Some banks may ask for proof of address separately.

Assuming your application is approved, your account may be opened very quickly and within several days you may be able to receive your chequebook etc.

Choosing the Best Current Account

It is perhaps the one financial instrument that we use the most and think about the least: the ‘humble’ current account. Just about every adult in the UK has one and very few of them will ever switch from the one that they have been using for years. This is quite a sad state of affairs since it is quite likely that the account in question (i.e. the one that you’ve had since you started working!) has horrendous overdraft charges and pays very little interest.

It does not have to be like this however. The UK market is flushed with innovative banking products offering exciting features and incentives that could be of real benefit to you. It is also much easier to change accounts than you might think.

So what should you look for in a current account? The answer is that it would be best to find the one account that would fulfil your individual needs the best. There is no ‘one size fits all’ solution when it comes to choosing a bank account. Part of finding the best ‘fit’ would be to determine the usage patterns on your current account. The big question that you will have to answer is how much of the month, if any, you are overdrawn.

If your bank account is always in the black it would perhaps be best to change to a high interest account.

Finding a high interest account (This obviously refers to ‘high’ when compared to other current accounts) is much easier than it used to be as the intense competition in the current account market is forcing banks to offer better rates of interest. Before choosing a specific high interest account it is worth looking at what exactly is meant by ‘high interest’ and if it applies to all the funds in the account or not. In some cases the amount that attracts higher interest is capped at a certain level, while other banks will only pay higher levels of interest if you deposit a certain minimum amount in the account every month. It is possible to get around these issues (e.g. by transferring funds above the cap into a savings account and by making sure that you salary is paid into your current account) but it would perhaps be better to find an account where you are not faced with the hassle of having to do so.

If you make regular use of your overdraft you should perhaps aim for an account that is flexible and relatively cheap when it comes to charges and interest payments. Some accounts offer interest free overdrafts and can therefore be a very good option. You should be aware however that the charges and fees to make use of the overdraft can often be very high, cancelling out any potential interest saving. Another option would be look for a fee-free low interest overdraft. Here you will have to pay interest but at least you will know exactly where you stand and how much you are paying (as opposed to accounts levying daily charges, which can be very confusing)

One last thing to consider before making a final decision about an account is the kinds of incentives and optional extras that you would like included with your account. Do you want an account that could earn you loyalty points? Does your bank have to have a ‘bricks and mortar’ presence or are you satisfied with an online only service? Do you need a cheque book? Answering these kinds of questions will help you a great deal in making your final decision.

Once you have made your decisions about where you want to switch to the process should be fairly straightforward and painless and you can expect that your new bank will do as much as possible to assist with a smooth transition.

Summary:

• Most people stick with one bank account for a long time. This is not a wise financial decision since there is usually a lot to be gained by switching accounts.
• If your account is mostly in the black it would be wise to make sure that you select a high interest account.
• If your account is sometimes overdrawn the choice will normally be between accounts that charge no interest but that does levy fees and charges and account that do not normally have fees but that do charge interest.
• It is much easier to switch accounts than most people realise.