Top 5 tips
- Identify the main features that you need from a bank account.
- Meet with a member of bank staff to discuss what you think you want
- Make sure you know what you will be charged for
- If you have a savings account, make sure you know the penalties for accessing your money at short notice
- If you are unhappy with the services provided by your bank, consider making a complaint or alternatively consider “switching” your account to another bank
Types of bank accounts
When you open a bank account, you will have a variety of account types to choose from, each offering different things. It is up to you to select the type of account that best suits your requirements although a member of the bank’s staff will be able to discuss this with you and help you to make your decision.
Basic bank accounts
These are straightforward bank accounts, which allow you to store your money and from which you can pay money, although they do not usually allow you to go overdrawn. These are particularly designed for people with poor credit histories that may have difficulty opening other types of bank accounts. The high street banks provide this type of account but may call it by a different name.
There is usually no minimum opening balance, and no fees to pay. However some basic bank accounts allow you to try to make direct debits and debit card payments when you don’t have enough money in your account. In these situations you may be charged an “unpaid transaction” fee so always make sure you know what charges could be made.
You will need some form of identification to open a basic bank account however each bank’s requirements will differ.
Anyone with a criminal conviction for fraud or money laundering is likely to be refused any type of bank account, even a basic one.
These are accounts for day-to-day use, which allow easy access to your money. They offer more features than a basic bank account, for example, debit cards, cheque books, overdraft facilities, and often internet and telephone banking. They can also be set up for two or more people to use as a joint account. These accounts also may pay you interest if you are in credit, although the rate of interest paid will be extremely small.
Normally, if you have money in your account you are not usually required to pay anything extra to carry out basic functions, such as withdrawing cash (within the British Isles), paying for goods and services with your cheque book or debit card, paying cash in or making payments by standing order or direct debit. However, it is always advisable to read the terms and conditions of your account, and shop around if need be.
Some banks offer current accounts that come with additional services, for example, insurance products, for a monthly or annual fee. These are also known as ‘packaged’ or ‘paid for’ accounts. These suit some people, however it is important to know exactly what benefits you are paying for, how much you are paying, and if the services are actually of use to you.
These accounts allow you to put money aside, whilst usually earning a higher level of interest than a current account can offer. Savings accounts can operate in different ways, for example, a regular savings account where you can save a set amount every month up to a maximum sum and earn a higher rate of interest. By looking into the different types of savings account offered by your bank and the interest rate you could earn, will help you to decide what is best. However, it is important to remember that savings accounts often do not allow you such easy instant access to your money, for example, fixed term deposits.
If the interest rate you are getting is to change, the bank will inform you of this, and generally give you the opportunity to switch accounts for free if the change is significant.
Online savings accounts
These savings accounts allow you to make transfers to and from your current account online. You will need to be set up for internet banking with your bank in order to open this type of account. The interest you can earn on this account may be at a different rate to either your current or savings account and you should consider which account suits you best.
Saving versus investing
It is important to understand the difference between saving and investing. Saving is when you put your money away with the intention of getting it all back, plus the interest earned. Investing is usually a more long term option, which carries a higher level of risk, i.e. you could end up with less than you started with, but there is also potentially a higher level of return.
What is best for you will depend on your own individual circumstances, and you may wish to seek independent financial advice if you are considering investing your money. You can find out more information on the subject by visiting the Money Advice Service website.
Opening a bank account
When you have decided what type of bank account you want you will be required to complete an application process. Although this will vary from bank to bank, it will usually involve filling out a paper form, a form online, and in some cases having a meeting with a member of staff in the branch.
You will also be required to provide proof of your identity and address, and again, each bank will have its own individual requirements in this regard. It may seem like an onerous process supplying all of the documentation requested by the bank. However, your bank needs to collect this information in order to comply with international requirements set up to counter financial crime and terrorist financing
Whether you have gone through this process recently when opening a new account, or have held the same account for many years, you may, on occasion, be asked for some of this information again by the bank. The banks do this in order to confirm or update the information they hold about you, or for example, if you are making a large cash withdrawal or deposit.
For various reasons, the bank may reject your account opening application, and it would be considered a commercial decision for the bank. If you have asked to open a current account and this is refused, you could ask for a basic bank account. Do not assume that if one bank rejects you that other banks will take the same decision.
Switching bank accounts
At some point, you may wish to switch accounts, either at the same bank, or to another bank. In 2013, a new free-to-use account switching service was launched – the Current Account Switch Service. This is offered by some of the high street banks in Guernsey, and is designed to make switching current accounts simpler and more reliable. Your bank will be able to tell you if they offer this service locally.
If you are able to, and choose to use the switching service, you should first approach the new bank you want to switch to, where you will be asked to complete a Current Account Switch Agreement form and a Current Account Closure Instruction form. You should then be able to choose and agree a switch date with your new bank. You will be informed by your new bank when the switch has started and when it is complete, allowing you to continue to use your old account until then. All your incoming and outgoing payments should be moved automatically to your new account, as should any money in the account. The whole process is intended to take seven working days.
More information on switching bank accounts can be found on the Payments Council website.
Even if your bank does not provide this service, they may still be able to assist you by arranging for your standing orders and direct debits to be transferred over to your new bank.
Closing a bank account
If you want to close a bank account, you can usually do this by writing to the bank, or by visiting the branch in person. If you choose to write, and are unsure what information to include in your letter, or where to send it, your bank will be able to tell you. If you would rather inform the bank in person, it is advisable to check first whether you need to take any specific documentation with you before going in to the branch.
You will not usually be charged a fee to close a bank account. However, you may incur a penalty if you choose to close a fixed term account early. Details such as this should be made clear in the terms and conditions of your account.
For various reasons, the bank may also decide to close your account and is a commercial decision for the bank. However, your bank should give you reasonable notice before doing so, to allow you time to make alternative arrangements.
Complaining about your bank
If you wish to make a complaint against a bank, please visit the Commissions 'How to Make a Complaint' page.
If you have any more specific queries about a banking service or product, the Commission would suggest contacting your bank directly.
British Bankers' Association - The BBA is a trade association for the UK banking and financial services sector. It provides information about how to choose the right bank account for you, as well as information regarding borrowing and financial scams.
Guernsey Citizens Advice - Official website of the Guernsey branch of the Citizens Advice Bureau.
Guernsey Banking Deposit Compensation Scheme - Website providing information about the Scheme.
Money Advice Service - Free and impartial money advice, set up by the UK Government.
Payments Council – For more information on current account switching.