Best Bank Accounts

Quick questions

• Can I switch loads to bag lots of intro bonuses?

  Yes, though as you can usually only get the incentive once from each bank, at some point you will run out. However, bear in mind that to earn more than a £100 switching bonus in bank savings you would need £2,000+ (at current rates). So, it depends on whether you have this to save.

  One other thing to consider: continually switching accounts has a negative impact on your credit score. Lenders like to see stability in your accounts, and this doesn't demonstrate it.

• Where could I save otherwise?

  The top easy-access savings account pays 1.5% AER, so you can earn that without switching bank. So if bank savings pay, for example, 3%, then the gain from choosing it as your bank is 1.5%.
  

  But to counter this, the easy-access savings accounts tend to have high limits on the amount you can save in them – often £100,000s or £1,000,000s – whereas the most you can save and still get interest in a bank account is £20,000.

• Do you pay tax on savings interest?

  Since 6 April 2016, most people won't pay tax on savings interest as the personal savings allowance has kicked in.

  Basic-rate taxpayers can earn up to £1,000 in savings interest (including that which is earned in current accounts) before paying tax on it, easily covering the maximum interest on the accounts in this guide. For higher-rate taxpayers it's £500, which will cover all accounts in this guide. Additional-rate taxpayers don't get an allowance.

  Bonus payments are tax-free whatever rate of tax you pay. If you've used your personal savings allowance on other savings, or you don't get one, it's likely switching bribes will win for you.

• Could you be rejected when applying for a bank account?

  Possibly. If rejected, it may be for one of many reasons, such as you've got a poor credit record, you've had past dealings with that bank where you've missed payments or the bank doesn't think you'll be a profitable customer.

  But don't assume because one bank doesn't want you, none of the others will. All the same, don't just apply everywhere as it can do more damage to your credit record.

  If you're rejected, you need to do two things – first, ask the bank why it rejected you. Its answer may be vague, but it should tell you if you were rejected because of your credit record.

  The second thing you need to do is to check your credit files with the three credit reference agencies to spot any problems or possible errors. Our Credit Report guide tells you how to do this for free and how to correct errors.

• How do unauthorised overdrafts work?

  An unauthorised, or unarranged, overdraft is when you go beyond your allowed limit so you incur bank charges – you could be charged anything from interest to a daily or monthly charge – often up to £5/day (though these hefty charges are being banned from 6 April 2020).

  You can also be charged fees for paid or unpaid items – these are where a payment has taken you into your unarranged overdraft and the bank has accepted or rejected the transaction. They can be big, amounting to £5-£10 per payment.

  Banks have to have a maximum monthly charge for unarranged overdraft fees, which they must display on their sites. This should help keep costs down, though you can still face significant fees.

  As of February 2018, all banks with more than 150,000 active current accounts also have to alert you by text or through your app when you're close to going into an unarranged overdraft.