What are the different types of bank accounts?

With so many different types of bank accounts available in the UK, you may be  wondering how to choose the right ones for you. 

To help you understand which type of account might be right for you, this page outlines how the seven most common types of bank accounts work  and what they’re used for.

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

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 and graduate bank accounts – designed for higher education

6. Joint accounts – for managing money with others

7. Children’s bank accounts – for under 18s with parental oversight

A basic bank account gives you all the essentials for everyday banking, such as a debit card for withdrawing cash, without charging a monthly fee. They don’t typically include  arranged overdrafts or other forms of credit.

97% of UK adults have a current account, making it the country’s most common type of bank account.  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: 

• monthly pay-in requirements

• whether the bank offers an overdraft facility

• how easy it is to access your money

• if ATM withdrawals are free

If you want to change accounts or provider, most high-street banks now use the Current Account Switch Service - in most cases, your scheduled payments and balance will be transferred in around seven working days (although this is a target rather than a guarantee and can depend on other circumstances).

Packaged accounts offer the same features as current accounts with some added benefits. Unlike a standard current account, you’ll typically pay a monthly fee for a packaged account (usually between £10 - £15 per month).

Common benefits include car breakdown cover, travel insurance, special rates on overdrafts, or better rates on other financial products offered by the same bank. It’s important to check that the benefits you’ll receive will be worth the monthly fee. Plus, you may have to pay in a certain amount of money each month to unlock all the perks.

Savings accounts differ from current and packaged accounts as they are a type of bank account you pay money into and earn interest from, rather than using for everyday transactions. There are different types of savings accounts, including easy access accounts, notice accounts, regular savings accounts, ISAs, and fixed rate bonds. 

• Notice accounts offer variable rates and the flexibility to withdraw your money after a set notice period.

• Fixed rate bonds offer 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.

• Easy access savings accounts offer the freedom of topping up and withdrawing money at your convenience and typically feature a variable interest rate.

Student and graduate accounts are current accounts designed for those in higher education. Many student accounts start with a modest interest-free overdraft that can then increase with each year of study, potentially reaching up to around £3,000 (depending on the bank). This benefit is also commonly offered with graduate accounts, but the 0% interest overdraft limit might reduce with each year after graduation. These accounts often include extras such as railcards, cashback, or discounts, but eligibility and limits may apply.

Student accounts typically mature into either a graduate account or a regular current account when you complete your course. It’s important to be aware that your overdraft may no longer be free post-graduation, so you might want to pay it off before your student or graduate account becomes a regular current account.

A joint bank account is structured in much the same way as a regular current account, but with two (or more) named holders. Each account holder can deposit and withdraw funds, so this type of bank account might be used by people who live together to share bills and household expenses. Everyone on a joint account shares responsibility if the account goes overdrawn. Some savings accounts can also be opened jointly, allowing each person to put money towards shared savings goals.

In the UK, children under 16 (sometimes under 18) cannot legally open a bank account solely in their name, so a children’s bank account offers a way for a parent or guardian to put money aside for younger savers. While individual features may vary, children’s accounts tend to have low (or no) monthly fees and funds that can be accessed under parental supervision. Some parents use these types of accounts to teach their children financial responsibility from an early age, while keeping the money aside until the child is old enough to control the funds in the account themselves.

The way a bank account works depends on the type of account you open, but most accounts enable you to store your money securely. Current accounts provide everyday banking services such as receiving your salary, making cash withdrawals, paying for things online and in shops, transferring funds, and paying bills. Conversely, savings accounts are designed for depositing money and earning interest.

All FCA-registered banks, building societies, and credit unions in the UK are covered by the Financial Services Compensation Scheme (FSCS). This means that eligible deposits are protected if the financial institution fails. The FSCS protects up to £120,000 per person, per bank, or up to £120,000 for joint accounts. This limit applies to all deposits held with a bank, including current and savings accounts.

Step 1: Gather your documents. You’ll typically need two documents:

• Proof of identity – for example, your passport, driving licence, or national ID card

• Proof of address – for example, a recent utility bill, mortgage statement, or current tax bill

Some banks may request that both documents are no older than three months.

Step 2: Choose how to apply. Decide whether you want to apply online or visit a local branch.

Step 3: Submit your application. Follow the bank’s process to submit your documents and complete the application.

Step 4: Start using your account. Once approved, you can begin using your account for deposits, payments, and other banking services.

Most banks and financial institutions have a defined set of criteria for assessing a bank account application. While banks or building societies aren’t required to justify an account rejection, there could be a number of reasons:

• A poor credit history: Applicants who have previously been in debt, defaulted on payments, or are financially tied to someone with a poor credit history may be deemed a greater risk.

• Income: Some accounts require a minimum monthly payment. If your monthly wage falls below this, your application may be rejected.

• 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.

There are options available to individuals whose application for a bank account is rejected. These include:

Applying for a different current account

Different bank accounts have different eligibility rules, meaning you might get accepted for an account elsewhere. However, sending out lots of applications at once can affect an applicant’s credit score. 

Apply for a basic account

As the name suggests, a basic account only lets you complete basic transactions, such as paying in your wages, paying bills, and making deposits. Unlike a current account, a basic account doesn’t offer overdraft or cheque facilities.

Take out a pre-paid card

Similar to a basic account, prepaid cards allow you to complete basic transactions without access to credit. Some providers don’t carry out a credit check. You may be able to receive wages or benefits directly, but this depends on the card and your employer.You will, however, incur a fee each time you top them up or withdraw money, and this fee varies between providers. Pre-paid cards are not typically covered by the FSCS in the same way bank deposits are.

Apply for an account with a credit union

Credit unions are forms of community-based, member-owned financial cooperatives that sometimes offer current account facilities. These accounts typically let you complete basic transactions, including withdrawals and deposits. Credit unions may charge account holders a monthly fee, and typically have strict application criteria. For example, they may only offer accounts to people working in a certain industry or living in a certain area.

If you’re new to the UK, you might not have the proof of address you need to open a bank account. This can make it difficult to receive wages and complete essential transactions.

If you’re in the UK to study, banks might 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. Alternatively, a letter from your employer may suffice. 

You could also take steps to open a bank account before you arrive in the UK. You might be able to ask your current bank to update your address and send a statement showing your UK address. Alternatively, some international banks have partnerships with UK banks that may allow you to open a UK account in advance. Restrictions or minimum deposit requirements may apply.

Finding the right type of bank account depends on your personal needs. You may be able to open more than one type of account. For example, people often have a current account for day-to-day transactions and also open a savings account to put money aside for bigger purchases, such as a house deposit, wedding, or retirement, or even just to act as an emergency fund.

The overview table below shows the main types of bank accounts and their features.

Regardless of the type of current account you have, you may be able to switch accounts. Over 50 banks and building societies in the UK now use the Current Account Switch Service*, which means your new bank will be responsible for the entire process. 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, it may transfer to your new account if the bank allows. If your new bank won’t take on your overdraft, you might still be able to switch, but you may 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. 

• You can keep your old account open while switching, but this may take longer than seven working days.

It isn’t necessary to use the account switch service if you are changing bank account types with the same provider. For example, some banks change a student account to a graduate account automatically after the student has finished their studies.

For a step-by-step guide to the account switching process, read more in our page on switching bank accounts.

If you are ready to start saving, explore the accounts available at Raisin UK and compare interest rates. You can choose from easy access savings accounts, notice accounts, or fixed rate bonds with rates of up to 4.50% AER. Easily open savings accounts by registering for a Raisin UK Account. 

You benefit from:

• Competitive interest rates from more than 40 partner banks and building societies

• No account opening fees

• FSCS deposit protection, which covers eligible deposits up to £120,000 per person, per bank

• Easy online application

*https://newseventsinsights.wearepay.uk/media-centre/press-releases/the-current-account-switch-service-surpasses-11-million-total-switches/