What are the different types of bank accounts?

These are the most common types of bank accounts in the UK: 

1. Basic accounts – just the essentials
2. Current accounts – for everyday banking
3. Packaged accounts – current accounts with extra benefits
4. Savings accounts – earn interest on your money
5. Student & graduate bank accounts – designed for higher education

Basic accounts

Giving you access to the essential features for everyday banking, a basic bank account gives you all the basics you need without a monthly fee. It’s a great choice for those who may not qualify for other kinds of bank accounts.

Current accounts

Most people use a current account for their daily banking needs, such as making cash deposits and withdrawals, receiving their salary and setting up direct debits. When opening a current account, you might want to consider what the funding requirements are, whether the bank offers an overdraft facility, how easy it will be to access your account and whether ATM cash machine transactions are free. (There’s more information on how to switch your current account below.)

Packaged accounts

Packaged accounts are a type of current account that provides extra benefits for a fee, typically between £10 and £15 per month. They’re known as packaged accounts because they offer the same features as current accounts, as well as added extras. These extras could include car breakdown cover, travel insurance, special rates on overdrafts, or better rates on other financial products offered by the same bank. Even if these extras sound appealing, it’s important to check that the benefits you’ll receive will be worth your monthly fee, and consider whether you’ll take sufficient advantage of them.

Savings accounts

Savings accounts are different from current and packaged accounts as they are a type of bank account you pay money into and earn interest from. There are different types of savings accounts, such as easy access accounts, notice accounts, regular savings accounts, ISAs and fixed rate bonds. 

• Notice accounts offer competitive variable rates and the flexibility to withdraw your money after a set notice period.
• Fixed rate bonds offer competitive fixed interest rates when you deposit a lump sum for a set period of time. This means the interest rate won’t change until your account matures, so you’ll know exactly what your return will be at the end of the term.
• Easy access accounts offer the freedom of topping up and withdrawing money at your convenience and typically feature a competitive variable interest rate.

Student & graduate accounts

Student and graduate accounts are similar to current accounts, but the main difference is their overdraft facility, with many banks allowing students an interest-free overdraft of up to £3,000. This benefit is also commonly offered with graduate accounts. If you open a graduate account, you might also be offered an attractive mortgage rate or benefits on other financial products with the same bank. Designed for those in higher education, student and graduate accounts typically mature into regular current accounts when you complete your course. If this is the case, it’s important to be aware that your overdraft may no longer be free, so you might want to pay it off before your student or graduate account becomes a regular current account.

How a bank account works depends on the type of account you open (more on that below). Having a bank account enables you to store your money safely while being able to complete essential, everyday transactions such as paying your bills, making online and in-store purchases and being paid any wages. 

For example, current accounts provide everyday banking services such as  receiving your salary, making cash withdrawals and paying bills. Conversely, savings accounts are designed for the sole purpose of giving you an account to deposit money and earn interest.

It’s also good to know that all registered banks, building societies and credit unions in the UK are backed by the Financial Services Compensation Scheme (FSCS). This means your deposits are protected, so you should be able to claim back the money you deposited into your account in the event the financial institution fails. You can claim up to £85,000 per person, per banking group, or up to £170,000 for joint accounts. 

To open any type of bank account in the UK, you’ll typically need two documents; one that proves your identity and one that proves your address. This is usually the same whether you’re opening an account in a branch or online. 

The documentation you can use for proving your identity usually includes your passport, driving licence or an identity card. A document that proves your address could be a recent utility bill, mortgage statement, or a current tax bill. Most banks require this documentation to be no more than three months old.

Once you have these documents, it’s pretty easy to open a bank account online by following a few simple steps, or going into your local branch to apply.

Most banks and financial institutions have a defined set of criteria for assessing your application for a bank account. If you’ve had a bank account application rejected, it’s likely down to one of the following reasons:

• A poor credit history: If you’ve previously been in debt, defaulted on payments or are financially tied to someone with a poor credit history, this will make you less ‘attractive’ to some banks
• Your income: Some accounts require a minimum monthly payment. If your monthly wage falls below this, it could be the reason your application was rejected
• Your age: You may be too young to hold certain accounts with some banks
• Insufficient ID or proof of address: If the bank can’t verify your identity or address, it’s unlikely they will accept your application

The good news is that you do still have options even if your application for a bank account is rejected. Some of your options are:

Apply for a different current account

Different accounts have different eligibility rules, meaning you might get accepted for an account elsewhere. However, try to avoid sending out lots of applications at once, as this can damage your credit score. 

Apply for a basic account

Doing exactly as its name suggests, a basic account only lets you complete basic, essential transactions, such as paying in your wages, paying bills and making deposits. Unlike a current account, they don’t offer overdraft or cheque facilities with any benefits, and charges are likely to vary between providers. 

Take out a pre-paid card

Apply for an account with a credit union

If you want to improve your credit rating and gain access to credit, there are some steps you can take to improve your credit score, such as the following: 

• Ensure you’re enrolled on the electoral register. This is one of the ways banks verify your identity, and if you haven’t already enrolled, that might explain why you’ve been rejected for a bank account. You enrol on the electoral register here

• Where possible, aim for stability. For example, banks are likely to find you more financially attractive if you’re employed rather than self-employed
• Ensure that you consistently pay all your bills on time 
• Space out credit applications, as too many in a short period of time can damage your overall score
• Financially disassociate yourself from anyone with a low credit rating, or who has experienced financial difficulties. This is because their score can sometimes affect yours. You can do this by getting in touch with credit agencies.

If you’re new to the UK, you might not have the proof of address you need to open a bank account, which can make it difficult to receive wages and complete essential transactions. There are a few ways to get around this. If you’re in the UK to study, many banks accept a letter from your University admissions office. If you’re working, you should be able to get a letter from Jobcentre Plus which confirms your National Insurance number. Even a letter from your employer will suffice in most cases, as long as it’s less than three months old. 

You could also take steps to open a bank account before you arrive in the UK. For example, you might want to visit your existing bank and ask them to change your address and send you a statement with your UK address on it, which will give you proof of your new address. 

Alternatively, your bank might have a corresponding banking relationship with a British bank. If they do, you might be able to open an account with the corresponding bank before you get to the UK. If you choose to pursue this option, it’s important to discuss any restrictions or required deposit amounts with your account provider beforehand.

The type of bank account that’s right for you will depend on your personal needs, and you may need to open more than one type of account. For example, you’ll probably need a current account for your day-to-day transactions, but you might want to open a savings account as well, so you can save for bigger purchases, such as a house deposit, wedding, or your retirement, or even just to act as an emergency fund.

Regardless of the type of current account you have, you should be able to switch accounts with no issues. Over 40 banks in the UK now use a streamlined switching service, meaning it should only take seven working days to switch over from your old account once your new one is up and running. A couple of things to consider are:

• If you’re switching with an authorised overdraft and have a good record of paying it back, most banks will consider taking it on. If your new bank won’t take on your overdraft, you might still be able to switch, but you’ll need to negotiate a payment plan to pay off the overdraft with your old bank. 
• If you’re looking to switch a joint account, you will only be able to switch to another joint account. This means you’ll be unable to switch from a joint to a sole account. 

This new switch service is called the Current Account Switch Service, and it carries a guarantee that means your new bank will be responsible for the entire process. (Don’t forget to check that the bank you want to switch to uses this service.)

Here’s how the switch service works:

1. Find your new account and follow the normal application process, providing both proof of address and ID. 
2. Complete a Current Account Switch Agreement form and a Current Account Closure Instruction form so that the switch can go ahead. In order to switch without affecting your credit rating, it’s important that you don’t apply for several accounts at once. 
3. Your new bank or building society will confirm that they’re using the Current Account Switch Guarantee, giving you peace of mind that they will ensure a smooth process. You’ll then set a switch date that’s convenient for you, and is a business day at least seven working days after your new account has been opened. 
4. Once the date has been set, your new bank will confirm that the switch is underway and that it will complete on the agreed date. It’s important that you don’t set up any new payments or direct debits during this time. 
5. On the switch date, you should receive confirmation that the process is complete, which means you can start using your new account. 

If you want to switch without closing your old account, it’s possible to do what’s called a ‘partial switch’. This will keep your old account open, but it means that you won’t be covered by the Switch Service Guarantee, and it may take longer than seven days to complete.

If you want to quickly and easily open savings accounts, register for a Raisin UK Account and log in to apply. We don’t charge you for opening savings accounts through our online marketplace, and you can open different accounts with just a few clicks, including fixed rate bonds, notice accounts and easy access accounts.