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Banks and building societies

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.

Step 1: 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

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.

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.

Step 2: How to open an account

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.

Step 3: Managing your account

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.

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.

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.

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.

Step 4: Finding out more

The Financial Services Authority (FSA) has detailed information about accounts on its website for consumers, Money Made Clear (link opens in new window).

The Money Matters to Me website, produced by the National Institute of Adult Continuing Learning, has:

• an activity to help you understand and write cheques (link opens in a new window)
• a cashpoint machine simulator (link opens in a new window) so you can learn to withdraw money 
• A Chip and PIN simulator (link opens in a new window) so you’ll know how to use your card in a shop.

Last updated: 5 November 2008