11 common banking questions answered

11 common banking questions answered
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Do I need a bank account?

It’ll certainly help you manage your everyday money. Plus a bank account can help convince a lender that you’re financially trustworthy. There are different accounts to suit your situation.

What’s a current account?

This is for managing your day-to-day living expenses. If you have money in your account or are ‘in credit’ you don’t have to pay a fee for services such as paying for goods with a debit card. Though this may change in future. However, you do have to pay if you want to borrow money from the bank such as using its overdraft facility or if go into the red unintentionally. Some accounts pay you interest if you are in credit, but a savings account usually pays a higher rate

What’s a packaged account?

These are current accounts offering extra features such as commission-free currency or travel insurance in return for a monthly fee.

One in ten women don’t want a joint bank account as they don’t want their partner to know what they are spending their money on! Source: N&P Building Society

What's a savings account?

This is for putting away money, say for holidays or emergencies. Savings accounts pay a higher rate of interest than current accounts, so your cash grows. It may offer a passbook and access to your money via a cash machine or online. Savings accounts may also be tax-free cash Individual Savings Accounts (ISAs) or notice accounts (where banks require an agreed set-period of notification for money withdrawals). Don't rely on your bank to offer the best savings rates. Use the weekend papers to find the best returns.

Which is the right type for me?

“Draw up a list of what you need from a bank account,” says Brian Capon at the British Bankers’ Association. “Include non-financial considerations, such as convenience to branch if this is important. Double-check with staff that the features you are looking for are included in the account.”  Compare accounts using the www.moneyfacts.co.uk or www.moneysavingexpert.com websites.

Ten million bank customers (21 per cent of the adult population) can’t find a reason to recommend their bank to someone else. Source: Triodos Bank 

Should I have an overdraft?

It makes sense to have one in case of emergencies even if you never use it. Setting up an overdraft facility before you go overdrawn will save you lots of money as most banks charge around 12%. You will also pay high fees for unauthorised borrowing.

How do I correct a mistake on a statement?

Try and keep all your card receipts and use these to examine your statements thoroughly. Don’t only check your balance, look out for any cheques you’ve written that might not yet have been presented for payment or for any transactions you don’t recognise. If this happens, contact your bank immediately and ask it to investigate.

How long should I keep statements?

“For at least six years,” says Capon. “As soon as you throw one away, you’ll find you need it! Availability of online statements varies between banks, ranging from two months to seven years, so print off or download to an accounting package on your home computer, such as Sage (0845 111 5555). If you don't have a computer then keep manual comprehensive records of your finances.

How do I switch accounts?

Go to the new bank with two forms of ID (passport, driving licence etc), and proof of address (utility bill or bank statement). You new bank will ask you to complete the new forms and will handle the transfer process for you.  Let your employer or pension provider know your new account details. Your account should be running within 10 working days. Keep the old account open for a couple of months just in case.

How can I bank safely?

Beware of emails and phone calls purporting to be from your bank. “There are many scams around and it’s important you don’t give personal details unless you’re certain who you are giving them to. Your bank may need to contact you at some point, for instance to check an unusual transaction but if in doubt ask for the person's name, department and phone number and say you'll call him or her back. Then use the number that appears on your bank statement. When you get through, ask to speak to the person, quoting their department and number or extension. If the caller is genuine, then they won't mind. Remember a bank will never ask you for your full PIN or password,” advises Capon.

How do I switch my ISA to a new provider?

To keep your tax-free ISA, status, never withdraw the money yourself. Contact the new provider and it will oversee the transfer process on your behalf. While you can transfer part of a previous tax year’s ISA, you have to transfer this year’s ISA in its entirety. You can also transfer money you’ve saved in cash ISAs into ‘stocks and shares ISAs’. However, it doesn’t work the other way round.

 5 banking terms explained

1.   APR (annual percentage rate) – the interest you pay annually on a sum you have borrowed eg using a loan or credit card.

2.   AER (annual equivalent rate) – the interest your money will earn in a savings account if left for a year.

3.   Interest - the charge you pay to borrow money, or the income you receive if you invest cash in a savings account.

4.   Direct Debit (DD) is the simplest way to pay for regular or occasional bills eg utility or TV licence.

5.   Standing Orders (SO) are a convenient way of paying regular fixed amount bills eg mortgage repayments or transferring cash to another account.