Banking
Banks and building societies play a big part in the lives of
most adults. They are the places where we usually keep our money
and that our wages and benefits get paid into. Often we arrange for
our bills to get paid directly from our bank or building society.
We can also sometimes borrow money from them.
This section explains more about banking and how to set
up and manage accounts.
You can read through this information sheet, or go directly to
the sections you want to read by clicking on these links:
Banks and building societies
Understanding accounts
To keep our money in a bank or building society, we need an
account. There are lots of different sorts designed for people with
different needs, but they come under three main headings:
Basic accounts
A basic bank account allows you to pay in money, such as wages,
pensions and benefits, and gives you a cash card to withdraw money.
You are unable to have an overdraft, cheque book or receive
interest on credit balances.
These are for people who may have problems opening other
accounts, perhaps because they do not have much money coming in or
a good record of paying back money. With a basic account, you
cannot take out more money than you have, as you will not be
allowed to go overdrawn.
Current accounts
These accounts offer more services than basic accounts and you
can arrange an overdraft with the bank allowing you to take out
more money (up to an agreed limit) than you have in your account if
you need to. If you do use this service, you have to pay interest
on the money you have borrowed. See Interest.
Savings accounts
Savings accounts pay interest on the money we put in them. We
use them when we are trying to save money because the interest
makes the money we save in them grow. See Interest and Saving and investing.
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Credit unions
Credit unions are financial cooperatives that are run and
managed by their members, who usually have something in common,
such as living or working in a certain area, a job, trade union or
church. They often work on a ‘not-for-profit’ basis and aim to give
members low-cost, flexible financial services.
Some credit unions now offer current accounts as well as savings
accounts so it is possible to carry out your day-to-day banking
through one of these rather than a bank or building society. For
more information, see the Association of British Credit Unions
Ltd (link opens in a new window) website.
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Banks and building societies
Opening and managing bank accounts
To open most accounts you need to go in person
to the bank or building society. Once there, you’ll need to:
- fill in an application form
- Prove you are who you say you are by bringing along
identification such as a passport, driving licence or benefits book
and something like a utility bill that shows where you live
- Pay in some money, although sometimes you can do this
later.
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Features
There are different sorts of accounts with different features.
This means that they do not all operate in the same way and it is
important to talk to your bank or building society about the
services included and the conditions attached to the account you
choose.
Generally, once you have opened an account you will receive:
- A cheque book and a cash or debit card so you can spend your
money. They will also give you a Personal Identification Number
(PIN) that you will have to key into the number pad on cashpoint
machines when you withdraw money and a shop’s CHIP and PIN card
keypad or portable machine when you pay for items with your
card.
- Paying-in slips to help you pay cash or cheques into your
account
- Statements to let you know how much money you have in your
account.
You can then usually:
- Set up direct debits or standing orders so that you can pay
bills or make regular payments straight from your account
- Have regular payments such as wages, pensions and benefits paid
directly into your account.
You may also be able to:
- Use telephone and internet banking to manage your money
- Set up an overdraft so that you can borrow money if you need
to.
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Understanding bank charges
Your bank or building society may charge you for some services.
They are expected to publish a list of all transaction charges so
you are clear about the costs involved.
- If you arrange an overdraft you will be charged interest on any
money you borrow. If you go overdrawn without arranging an
overdraft or you go over your agreed overdraft limit, you are
usually charged more.
- If you write a cheque for more money than you have in your
account or do not have enough in your account to cover direct
debits or standing orders, your bank or building society may
‘bounce’ these payments, which means they do not release the money
to pay them. They usually charge you a fee for bouncing
payments.
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Keeping your money safe
- It’s important to keep all your bank cards, PIN numbers,
cheques and paying-in books safe and to inform your bank
immediately it you lose them or they are stolen.
- Check your statements regularly and let your bank know straight
away if something is wrong.
- If you use telephone or internet banking, keep all your
passwords private and make sure people cannot overhear you or see
what you are doing. It is also a very good idea to make sure any
computer you use for internet banking has security software
installed.
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Maintaining a good relationship with your bank or building
society
A lot of people are quite nervous of banks and building
societies and do not like the idea of talking to them, particularly
when they are finding managing their money a struggle. However, it
is a good idea to keep them up to date with your circumstances and
let them know immediately if you are getting into difficulties with
money so that they can help you manage. And if you do not
understand anything about your account or how it works, just
ask.
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Further information
The Money Advice Service website has detailed
information about types of bank accounts (link opens in a new
window).
The Money Matters to Me website, produced by the National
Institute of Adult Continuing Learning, has:
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Last updated: 7 October 2011
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