Types of Current Account
There existed originally one type of current account. This was the traditional chequebook current account, which people would open to enable them to pay for purchases without the need and risk of carrying cash around with them. Current accounts offered a practical means of paying for things using cheques instead of physical cash.
A cheque is a document containing a contractual promise from the bank to the person named in the cheque an amount as shown on the cheque.
As competition amongst banks has grown so has the need for them to differentiate the products and services that they offer. Banks have developed the idea of the traditional current account with the aim of attracting and holding onto more customers. Therefore there are now an enormous variety of current accounts available to the customer.
The Traditional Current Account
The name really says it all with this type of current account. Customers can deposit their money in the bank account and then withdraw it whenever they want using one of a number of means. The methods of withdrawing the money from the current account usually include: Cheque book, often issued with a guarantee card up to a certain amount; ATM or cash card which allows the withdrawal of cash from the current account at a variety of cash machines; debit card which allows you to pay in a similar way to a credit cad but you must have the money in the current account which is the debited or deducted straight away; counter cheque which allows you to present a cheque to the cashier at the bank and they will issue you with.
Typically the rate of interest hat is paid on this type of current account is very low. The bank will often provide an overdraft facility with this type of current account where you can overdraw the amount that you have in the current account. However if the customer goes over the pre agreed overdraft level then the bank often apply heavy penalties.
High Interest Paying Current Accounts
This type of current account is for the bank customer who requires quick and flexible access to their money but will maintain a high balance at all times in the current account. Certainly the customer won’t require an overdraft facility.
The account works in almost an identical way to the traditional current account. The methods of withdrawing money from he current account are the same for the high interest current account as for the high interest current account.
The difference with this type of account lies on the level of interest that is paid to the current account holder and the amount of the balance that must be maintained within the current account. The bank often applies varying levels of interest paid according to pre-defined thresholds. If the customer fails to maintain the minimum balance within the current account the bank will apply penalty charges to the account.
Young Persons and Student Current Accounts
The banks usually provide these types of current accounts to current account holder. The account usually provides all of the withdrawal facilities that are offered by the traditional and high interest current accounts but with the exception of offering a guarantee card.
This type of current account is a means of getting younger people and students used to the idea of operating a current account. These types of bank accounts do not usually have any minimum balance thresholds but also do not offer any form of credit or over draft facility. The account holder can spend only money that has been deposited in the account.
Graduate Current Accounts
This type of current account is targeted at those that have recently graduated from university and are aimed at offering a range of financial services to suit those now getting into working life. Banks have researched the position and found that on average the earning power of someone who is in their mid to late thirties is greater if the have graduated from university. For this reason the banks tailor accounts and services to this type of person. The banks aim is to get them signed up to a current account as soon as they leave university in the hope that they will retain them as a customer after that for a long time.
The bank offers attractive incentives aimed at the typical graduate’s requirements. For example the banks know that after graduation many students are short of money but will have good earning power in the future and so offer very attractive rates on loans that they offer for holders of this type of current account. Many of the charges that are sometimes applied by banks to current accounts are not applied or are applied at a reduced rate for this type of current account
Foreign Currency Current Accounts
This type of current account has become more common since the adoption of the Euro across most of Europe. It allows the customer to make payments using a variety of methods to individuals or companies who want to receive the money in a foreign currency. Dollar currency accounts have existed for a long time but the introduction of the Euro has fuelled a big increase in this type of current account being operated by the bank customer.