Topic 4 Every Day Banking - Coggle Diagram
Topic 4 Every Day Banking
choosing a current account
Most adults use a current account for their everyday banking needs, such as receiving
payments, storing money for short periods of time, making payments and accessing
cash. There are current accounts designed for people aged 11 and over and others
that are only available once people are 18 because they include the facility to apply
for overdrafts. Young people often use a savings account for everyday banking
because their main requirements are to store money and withdraw cash.
4.2 Different types of current account
There are a number of different types of current account including:
◆ standard current accounts, offering a full range of payment methods including
debit card and cheque book;
◆ packaged accounts, which charge a fee for including additional services with the
account, such as travel insurance and car breakdown cover;
◆ basic bank accounts, which offer a debit card and/or cash card but no overdraft
or cheque book;
◆ student accounts, often with an interest-free overdraft;
◆ youth accounts (for people under 18 years old); and
◆ premium accounts (for wealthy customers).
4.3 Opening an account
Before anyone can open any new account, including a current account, they must
supply the provider with proof of their identity and address. This requirement is
designed to prevent money laundering and is set out in the Money Laundering
Regulations 2007. Money laundering is the term used to describe the ways in which
criminals can use accounts to hide the source of their funds (for example, drugdealing) and to make payments in support of their activities (for example, terrorist
activities). Providers who do not follow the legal requirements face heavy fines. For
example the Financial Conduct Authority (FCA) has fined a private bank £4.2 million
for failing to take reasonable care to establish and maintain effective anti-moneylaundering controls over a period of more than three years (FCA, 2013).
4.4 Monitoring transactions
It is important that people check their current accounts to ensure they have sufficient
money to pay transactions that are due, that they are keeping to their budget and
that mistakes have not been made. People can use statements that are provided
online, on paper and via ATMs to monitor their transactions. Statements are usually
provided once a month for current accounts, unless very few transactions are made,
in which case they may be provided less frequently.
Statements often use abbreviations to describe transactions, and each provider can
devise its own. For example, money paid in by electronic transfer may be referred to
as a DC (direct credit), Bacs transfer (Bacs is the central payment system used to
process several different types of electronic payment, especially direct credits) or
BGC (bank giro credit). Direct debits may appear as DDR, DD or BD. Providers usually
explain the codes on the statement and / or on their website or current account
4.5 Switching and closing accounts
Providers offer a free service for switching between accounts at different providers.
This is discussed in more detail in Topic 7. They also offer a free switching process
between accounts held at one provider – for example, students may switch from
student current accounts to graduate accounts at the end of their course and from
graduate accounts to standard current accounts after about three years.
People who want to close their current account can do so at any time and at no cost,
although they must pay any fees and other money that they owe. They do not need
to give a reason, although many providers will ask, for marketing research purposes.
People need to return their payment cards and cheque books when they close their
account. The provider may need to delay closing the account if there are automated
payments due or cheques written on the account that have not been presented for
payment. People will need to tell the provider where to pay the balance on the
account – for instance, by a cheque made payable to the account holder or a transfer
to another account.