Selecting the Best Bank Accounts
Bank accounts provide an essential service in modern life. While many of the functions provided by modern bank accounts simply make life easier, it is very difficult to lead a normal life without access to some of the core functions provided by banks like money transfer and use of ATM machines. Most employers now transfer wages and salaries through BACS transfers, while paying bills can be very challenging without the use of Direct Debit, especially if you live in one of the rural areas no longer served by a post office. The big high street banks like Santander now offer a wide range of bank accounts, so how do you go about picking the best one?
When it comes to money matters, people generally fall into one of two broad categories. Some people either earn well, or are prudent in financial matters, and rarely if ever need to use an overdraft facility. The second category is those that do make use of an overdraft with regularity. You could probably split the second category into people who rely on the overdraft pretty much every month as pay day approaches, and those that perhaps need to dip in several times a year on average.
The bank accounts with the best interest rates typically carry the heaviest penalties for overdraft usage. This can mean significant interest for using the agreed overdraft, and more importantly, heavy penalties for ending up with an unauthorised overdraft. However, those with good regular cash flow that covers outgoings – those that don’t need to use an overdraft – need not be put off by penalties that won’t be incurred. Instead, interest rates of as high as 5% for the first twelve months can be enjoyed for those that can guarantee a minimum regular monthly deposit. The bank accounts with the very best terms and conditions are generally reserved for such customers, especially if other products like savings accounts and mortgages are taken from the same provider.
The choice of bank accounts is a little more involved if income fluctuates or is generally low. Irregular deposits left to meet the cost of regular bills can often lead to cash flow problems. If it is possible to stay within an agreed overdraft limit, there are now plenty of bank accounts on offer that can minimise the cost of regularly using overdraft facilities. Generally, this comes at the cost of a lower interest on the account. However, in the current financial climate, the difference between the interest rates offered for premium accounts, and those of offer from low fee overdraft accounts is negligible, especially for those with a modest income.
Unauthorised overdrafts can be the cause of many compact personal financial disasters. Penalty fees can multiply like small mammals, but without the charm, resulting in the poor financial health that caused the problem in the first place being swiftly compounded. Thankfully, the industry has developed to a point where low incomes are no longer treated as a moral defect, and several bank accounts are now on offer that will not produce charges for unauthorised overdraft breaches. Students perhaps have the most choice when it comes to such deals, but with a quick look online you’ll find that working people now have access to such bank accounts too, especially if a savings or mortgage account is taken from the same institution.
