Different types of Current Accounts

Question 1

Explain what is meant by Current Accounts

Answer 1

It is designed for frequent use.
Money can be paid in and withdrawn without the need to give notice.
Mostly used to get wages paid into, to pay cheques into and pay bills and expenses, and to withdraw cash.
Banks will try to incentivise buyers with promotional deals and bonuses.
Features include:
▸▸Rate of interest paid on any positive balance
▸▸Rate of interest charged on a negative balance
▸▸Overdraft limit
▸▸Charges on unauthorised overdrafts
▸▸Additional incentives

Question 2

Explain Standard Accounts

Answer 2

This is the normal account offered to customers with a reasonable credit rating. It includes standard features such as the ability to pay and withdraw money, cheque book, debit card, interest payments on positive balances and a pre-agreed overdraft limit.

Question 3

What are advantages and disadvantages of a Standard Account

Answer 3

Advantages:
No charges on credit balances.
Offers the holder a wide range of facilities including a cheque book, debit/cash card and possibly an overdraft facility.
Convenient for receiving regular payments, e.g. wages and making regular withdrawals

Disadvantages:
Potentially high charges on the use of an overdraft facilityStandard features only, i.e. no additional perks

Question 4

Explain Packaged/ Premium Accounts

Answer 4

This account offers additional features to a standard account, for example car and house insurance, credit card protection, breakdown cover and cash back on certain transactions. The bank may have additional charges for these accounts so it is important that you check whether you are being offered a good deal or not.

Question 5

What are advantages and disadvantages of a Premium Account

Answer 5

Advantages:
No charges on credit balancesOffers the holder a wide range of facilities including a cheque book, debit/cash card and possibly an overdraft facility.
Convenient for receiving regular payments, e.g. wages and making regular withdrawals.
Offers the holder additional perks at a packaged price cheaper than acquiring them individually (standard additional features include things such as holiday/travel insurance, break down cover and phone protection).

Disadvantages:
Additional monthly charge is frequently applied.
The package offered may not offer value for money or meet the needs of the individual account holder.

Question 6

Explain Basic Accounts

Answer 6

This account offers only limited features designed for those customers who may otherwise find it difficult to open a bank account due to poor credit ratings. A basic account will not offer an overdraft and will not pay interest on positive balances.

Question 7

What are advantages and disadvantages of a Basic Account

Answer 7

Advantages:
Available to customers with a low credit rating.
Offers an easy first step for individuals to gain access to banking facilities.

Disadvantages:
Limited facilities, e.g. no debit card or overdraft facility.

Question 8

Explain Student Accounts

Answer 8

This account is designed specifically to meet the needs of learners. Common features include an agreed overdraft limit and incentives to join the bank, for example free rail cards or cash. Banks are keen to attract learners because once a young person has joined a bank they tend to stay with that bank for life. However, this is less often the case now due to the availability of information on the Internet and the ease with which banks can be changed

Question 9

What are advantages and disadvantages of a Student Account

Answer 9

Advantages:
Bonuses offered are designed to meet the needs of learners, e.g. discounts on travel or small lump sum cash payment.
Course fees and student loans can be handled easily.

Disadvantages:
Overdraft facilities could encourage overspending.
Charges for overspending are highLimited facilities.