Bank accounts have been in the headlines recently after it was revealed that more than a quarter of savings accounts were failing to beat the Bank of England’s 0.75% base interest rate.
Despite this, the vast majority of lenders have factored the recent base rate hike into their mortgage products, creating a scenario where customers are paying out more whilst seeing the value of their savings dwindle.
This is also encouraging some people to consider their options when it comes to opening a bank account. Here are some of the different account types available:
1. An ISA Account
An ISA (Individual Savings Account) is widely considered to be a turbo-charged bank account, which offers a tax-free way for people to save or invest. This differs from a standard bank account as it enables people to hold shares, cash and unit trusts. This type of savings account came to prominence in 1999, when it replaced both personal equity plans (PEP) and tax-exempt special savings accounts (TESSA). ISA accounts typically offer higher returns that standard savings products (thanks largely to the more diverse range of assets included within), although there are usually greater restrictions in terms of withdrawing your funds.
2. A Current Account
In many ways, there are a number of similarities between current accounts and standard savings vehicles. More specifically, both enable you to deposit and withdraw cash, while current accounts offer you far greater flexibility in terms of paying bills, organising direct debits and your monthly withdrawal limits. However, current accounts are an extremely poor choice when looking to save cash or accumulate wealth, as they usually offer no interest at all and make it far too easy for you to spend your earnings. By using a single current account, it’s also hard to separate your cash and manage your finances in a way that helps you to make the most of your hard work.
3. A Joint Account
The last option on our list is a joint account, so-called because it’s held by dual applicants who each have control over deposits, withdrawals and the management of payments. Joint accounts are typically applied for by partners, who are looking to pool their finances and ensure that their domestic bills are paid from a single fund. Joint accounts can also help couples to reduce their costs, as they can minimise the number of open accounts in their name and any costs associated with managing these.
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