Introduction to Open Money Club's guide to Personal Banking

Looking for a new personal bank account, curious about what the best bank interest rates are, or just diligently checking you have the best current account deal out there? Choosing a current account or opting to switch can feel like a piece of admin that just isn’t worth bothering with. But, alas, do not fear! We are here to help.

Frankly, though, it could be a lot easier than you think. You can open current bank accounts electronically now, or through a quick conversation with someone on the phone or in a branch if that's what you'd prefer. Ultimately, banks have a big incentive to make switching personal bank accounts as simple as possible, as they hope that once they've snagged you that they'll keep you for a fairly long time. Use the table below to compare the current bank accounts out there designed for everyday, personal banking.

You might also be interested in our guide to student banking, guide to bank accounts for teens or our guide to savings and investments.

3 things you should probably consider

1

Overdrafts. If your current account is prone to going negative now and again (or, indeed, all of the time), then you should pay close attention to accounts which offer guaranteed overdrafts, interest free overdrafts, overdraft buffers and the lowest interest rates possible on arranged overdrafts. Of course, we'd always recommend having a good budget and sticking to it before going into debt, but you already know that. Check out the table below to compare the best bank interest rates and head to our overdrafts explainer for more info.

2

Interest Earned on Savings. If you are generally in positive territory in your personal bank account, then it’s prudent to look for current accounts with the best interest rates you can earn on your bank balances. Of course, if you consistently have extra cash in your current account, you may also want to check out our savings section. Check out the table below to compare the best bank interest rates available and head to our interest rates earned on savings explainer for more info.

3

Other benefits. Once you've figured out all of the sensible bits, like whether you need a current account with interest free overdrafts and the best interest rates or whether you care more about the interest rates you can earn on your savings, you can turn to some of the extra perks that come packaged with many current bank accounts. Some current accounts offer cash rewards for switching to them and others offer cashback on household bills. Be careful with sign-up incentives, some may seem very attractive in the short term, but are not so attractive when viewed over the long term. Reviewing your banking situation once a year mitigates this issue. Check out the table below for more details on the perks available or head to our perks & incentives explainer for more info.

Our Picks

M&S Current Account

M&S offer at least a £500 overdraft, with your first £100 interest free. Also offers a £125 gift card when you switch and an additional £5 per month for one year. You will also earn M&S points and have access to a 5% fixed rate savings account.

First Direct 1st Account

First Direct 1st Account offers at least a £500 overdraft, with your first £250 interest free. You will also be given £100 when you switch to them and another £100 if you are not happy and leave. Also gives access to a 5% savings account.

Nationwide FlexDirect

Nationwide FlexDirect offers some good incentives to switch - an interest free overdrafts for the first year and offering 5% interest on balances for the first year too. Be careful though, these offers expire after 12 months.

Compare the short list of personal bank accounts

First Direct 1st Current Account

Interest
Free
Overdraft:

£250

Overdraft
Interest
Rate:

15.9%

Interest
Earned on
Savings:

5.0%

First Direct 1st Current Bank Account is free as long as you pay in £1,000 per month (otherwise it's £10 per month). Offers a guaranteed overdraft of £500, interest free overdraft of £250, and a good rate on balances over that of 15.9% EAR. First Direct are transparent with charges and features and pride themselves on customer service - they are offering £100 CASHBACK when you switch to them and will pay you another £100 if you are not happy and leave them. Also comes with access to 5% monthly saver account.

M&S Current Account

Interest
Free
Overdraft:

£100

Overdraft
Interest
Rate:

15.9%

Interest
Earned on
Savings:

5.0%

Marks & Spencer Current Bank account is free. Offers a guaranteed overdraft limit of £500, an interest free overdraft of £100 and a good arranged overdraft rate of 15.9%. The account comes with an M&S loyalty scheme (1 point for every £1 spent in M&S) and access to the M&S Savings Account (5% on £25 to £250 per month). Also offers a £125 GIFT CARD when you switch and an additional £5 per month for one year.

Nationwide FlexDirect Current Account

Interest
Free
Overdraft:

£10

Overdraft
Interest
Rate:

20.0%

Interest
Earned on
Savings:

5.0%

Nationwide FlexDirect Current Bank Account is a free account. Offers an interest free overdraft for one year, which goes to a 50p per day charge for arranged overdrafts after the first year (equivalent to 20% on £1,000 EAR). Also offers 5% interest on balances up to £2,500 in your first year (so long as you are paying £1,000 into your bank each month), but that drops to 1% after the first year.

Tesco Bank Current Account

Interest
Free
Overdraft:

£0

Overdraft
Interest
Rate:

18.9%

Interest
Earned on
Savings:

3.0%

Tesco Bank Current Account is free. Offers arranged overdrafts at a good rate of 18.9% EAR. Also offers 2 clubcard points for every £1 spent in Tesco (double the usual) and 3% savings interest AER on balances up to £3,000.

TSB Classic Plus Current Account

Interest
Free
Overdraft:

£25

Overdraft
Interest
Rate:

19.84%

Interest
Earned on
Savings:

3.0%

TSB Classic Plus Current Bank Account is free. Offers an interest free overdraft of £25 and an arranged overdraft rate of 19.84% EAR with a £6 monthly fee (equivalent to a total EAR of 28.6% on £1,000). The account comes with up to £10 cashback every month and also offers 3% interest on savings balances up to £1,500.

Santander 123 Current Account

Interest
Free
Overdraft:

£0

Overdraft
Interest
Rate:

40.0%

Interest
Earned on
Savings:

1.5%

Santander 123 Current Bank Account has a monthly fee of £5. Offers arranged overdrafts for between £1 and £3 usage fee per day depending on overdraft limit (BEWARE - £1 on £1,000 is equivalent to 40% EAR), with 4 months free when you first switch to Santander. Also offers 1 - 3% cashback on household bills (you can calculate this on their website) and 1.5% interest on balances up to £20,000.

NatWest Rewards Current Account

Interest
Free
Overdraft:

£0

Overdraft
Interest
Rate:

19.89%

Interest
Earned on
Savings:

--

Natwest Rewards Current Bank Account has a £2 monthly fee. Offers a £10 overdraft buffer and arranged overdraft rate of 19.89% plus £6 monthly overdraft fee (equates to a total equivalent rate on £1,000 of 28.7% EAR). Also offers 2% in rewards on seven types of household bills, including council tax and 1% back from retail partners (you can calculate the value of this to you on their website).

Club Lloyds Current Account

Interest
Free
Overdraft:

£100

Overdraft
Interest
Rate:

68.4%

Interest
Earned on
Savings:

2.0%

Club Lloyds Current Bank Account is free as long as you pay £1,500 in each month (otherwise it's £3 per month). Offers 2% interest AER on balances up to £5,000 and also offers an annual lifestyle benefit (cinema tickets, magazine subscription, etc). Offers an interest free overdraft of £100, but BEWARE that rates are 68.4% EAR on planned overdrafts beyond that (1p per £7 per day).

Co op Current Account

Interest
Free
Overdraft:

£0

Overdraft
Interest
Rate:

18.9%

Interest
Earned on
Savings:

--

Co op Current Bank Account is free. Offers overdrafts at 18.9% EAR and monthly rewards of up to £5.50.

Halifax Reward Current Account

Interest
Free
Overdraft:

£0

Overdraft
Interest
Rate:

68.4%

Interest
Earned on
Savings:

--

Halifax Reward Current Bank Account is free. Account comes with £3 rewards each month and up to 15% cash back off purchases. If you switch, Halifax are offering £125 CASH BACK. They also offer a 6 month fee free overdraft, but BEWARE that rates are 68.4% EAR on planned overdrafts beyond that (1p per £7 per day).

Bank of Scotland Classic Current Account

Interest
Free
Overdraft:

£25

Overdraft
Interest
Rate:

68.4%

Interest
Earned on
Savings:

2.0%

Bank of Scotland Classic Current Bank Account is free. Offers 2% AER on savings up to £5,000 (you must sign up to Vantage to access these rates). BEWARE that rates are 68.4% EAR on planned overdrafts (1p per £7 per day.

Our summary table in a non-exhaustive list of just some of the major products out there. We’ve tried to keep the column headers to a minimum, while providing you with the information we think you will care about the most. Before opening any bank account, you should be sure that you do a full review of the product on its website and thoroughly read the terms and conditions. None of the information in this table is designed to provide advice, but only to empower you to help make your own decision. If you have any suggestions on how we can improve our table or you think we are missing something important, please drop us an email.


First Direct 1st Current Account


First Direct 1st Current Bank Account is free as long as you pay in £1,000 per month (otherwise it's £10 per month). Offers a guaranteed overdraft of £500, interest free overdraft of £250, and a good rate on balances over that of 15.9% EAR. First Direct are transparent with charges and features and pride themselves on customer service - they are offering £100 CASHBACK when you switch to them and will pay you another £100 if you are not happy and leave them. Also comes with access to 5% monthly saver account.


Interest free overdraft: £250
Overdraft Interest Rate: 15.9%
Interest Earned on Savings: 5.0%


Apply



M&S Current Account


Marks & Spencer Current Bank account is free. Offers a guaranteed overdraft limit of £500, an interest free overdraft of £100 and a good arranged overdraft rate of 15.9%. The account comes with an M&S loyalty scheme (1 point for every £1 spent in M&S) and access to the M&S Savings Account (5% on £25 to £250 per month). Also offers a £125 GIFT CARD when you switch and an additional £5 per month for one year.


Interest free overdraft: £100
Overdraft Interest Rate: 15.9%
Interest Earned on Savings: 5.0%


Apply



Nationwide FlexDirect Current Account


Nationwide FlexDirect Current Bank Account is a free account. Offers an interest free overdraft for one year, which goes to a 50p per day charge for arranged overdrafts after the first year (equivalent to 20% on £1,000 EAR). Also offers 5% interest on balances up to £2,500 in your first year (so long as you are paying £1,000 into your bank each month), but that drops to 1% after the first year.


Interest free overdraft: £10
Overdraft Interest Rate: 20.0%
Interest Earned on Savings: 5.0%


Apply



Tesco Bank Current Account


Tesco Bank Current Account is free. Offers arranged overdrafts at a good rate of 18.9% EAR. Also offers 2 clubcard points for every £1 spent in Tesco (double the usual) and 3% savings interest AER on balances up to £3,000.


Interest free overdraft: £0
Overdraft Interest Rate: 18.9%
Interest Earned on Savings: 3.0%


Apply



TSB Classic Plus Current Account


TSB Classic Plus Current Bank Account is free. Offers an interest free overdraft of £25 and an arranged overdraft rate of 19.84% EAR with a £6 monthly fee (equivalent to a total EAR of 28.6% on £1,000). The account comes with up to £10 cashback every month and also offers 3% interest on savings balances up to £1,500.


Interest free overdraft: £25
Overdraft Interest Rate: 19.84%
Interest Earned on Savings: 3.0%


Apply



Santander 123 Current Account


Santander 123 Current Bank Account has a monthly fee of £5. Offers arranged overdrafts for between £1 and £3 usage fee per day depending on overdraft limit (BEWARE - £1 on £1,000 is equivalent to 40% EAR), with 4 months free when you first switch to Santander. Also offers 1 - 3% cashback on household bills (you can calculate this on their website) and 1.5% interest on balances up to £20,000.


Interest free overdraft: £0
Overdraft Interest Rate: 40.0%
Interest Earned on Savings: 1.5%


Apply



NatWest Rewards Current Account


Natwest Rewards Current Bank Account has a £2 monthly fee. Offers a £10 overdraft buffer and arranged overdraft rate of 19.89% plus £6 monthly overdraft fee (equates to a total equivalent rate on £1,000 of 28.7% EAR). Also offers 2% in rewards on seven types of household bills, including council tax and 1% back from retail partners (you can calculate the value of this to you on their website).


Interest free overdraft: £0
Overdraft Interest Rate: 19.89%
Interest Earned on Savings: --


Apply



Club Lloyds Current Account


Club Lloyds Current Bank Account is free as long as you pay £1,500 in each month (otherwise it's £3 per month). Offers 2% interest AER on balances up to £5,000 and also offers an annual lifestyle benefit (cinema tickets, magazine subscription, etc). Offers an interest free overdraft of £100, but BEWARE that rates are 68.4% EAR on planned overdrafts beyond that (1p per £7 per day).


Interest free overdraft: £100
Overdraft Interest Rate: 68.4%
Interest Earned on Savings: 2.0%


Apply



Co op Current Account


Co op Current Bank Account is free. Offers overdrafts at 18.9% EAR and monthly rewards of up to £5.50.


Interest free overdraft: £0
Overdraft Interest Rate: 18.9%
Interest Earned on Savings: --


Apply



Halifax Reward Current Account


Halifax Reward Current Bank Account is free. Account comes with £3 rewards each month and up to 15% cash back off purchases. If you switch, Halifax are offering £125 CASH BACK. They also offer a 6 month fee free overdraft, but BEWARE that rates are 68.4% EAR on planned overdrafts beyond that (1p per £7 per day).


Interest free overdraft: £0
Overdraft Interest Rate: 68.4%
Interest Earned on Savings: --


Apply



Bank of Scotland Classic Current Account


Bank of Scotland Classic Current Bank Account is free. Offers 2% AER on savings up to £5,000 (you must sign up to Vantage to access these rates). BEWARE that rates are 68.4% EAR on planned overdrafts (1p per £7 per day.


Interest free overdraft: £25
Overdraft Interest Rate: 68.4%
Interest Earned on Savings: 2.0%


Apply


Explainers for Personal Bank Accounts

Personal Bank Accounts

What should I expect from a personal current bank account?
A personal bank account, often referred to as current account, should give you everything you’d associate with the basics of everyday banking. You’ll get a debit card and will likely have the usual online or telephone banking options as well as touch payments, Apple Pay and any other payment options currently in trend. You will be able to withdraw from many ATMs for free.

Who can open a current bank account?
Most bank accounts are available to anyone who is aged 18 and over (some are available for 16 year old and over). Some accounts will also require you to have been resident in the UK for the last 3 years, so if you have recently moved to the country you should double-check each bank’s policy here.

Can I have more than one current bank account?
Banks generally will require this account to be your main account and sometimes will specify minimum amounts that you will need to deposit into the account. They won't stop you from opening other current bank accounts, but this could impact whether you can retain and increase your overdraft limit or participate in many of the perks and incentives.

Will my current bank account cost me anything?
The majority of everyday bank accounts are free to use. However, there are a growing number of accounts which will have small monthly fees, or that will charge you fees if you fail to use your current account as your main account (often specifying a minimum £ amount to come through the bank account each month or requiring a number of direct debits to be set up in the account). If this is the case, you should weigh up all the benefits you will receive.



Switching Bank Accounts

It is likely that you already have a personal bank account. What should you do if you are hoping to switch to another account?

Should I just pick the bank I already have another bank account with?
Just because a certain bank was right for you at a certain time in your life, it doesn’t mean that that bank is right for you now.

We would always recommend that when your financial and life circumstances change, it is a good idea to re-acquaint yourself with what’s on offer out there for personal banking. It’s a good time to review the current bank accounts on offer from a fresh perspective. It's a good idea to review your personal banking once a year in any case, as the rates, terms and perks can change over time.

Don’t be scared of switching bank accounts. Banks want you to switch and so make it as easy as they can for you. Usually, you’ll just have to give them your details and they’ll go ahead and shut down your old account and set up your new account and transfer over things like your direct debits. The whole process takes around a week and won’t take much effort on your part.



Overdrafts for Current Accounts

Current account overdrafts can be useful to people who need a little bit more flexibility with their finances. So what is an overdraft, how do they work and why should you care?

What is an overdraft?
An overdraft on a current account allows you to spend more money from your bank account than you actually have. This means that you are effectively borrowing money from your bank and your current account bank balance will be in negative numbers or ‘in the red’.

An arranged overdraft is where you have previously agreed to an ‘overdraft limit’ with your bank and you will have to pay a certain amount of interest on how much you are overdrawn, a fixed amount or a combination of both. Some current bank accounts will offer a slice of your overdraft interest-free - wahoo.

Beware unarranged overdrafts...
Unarranged overdrafts are pretty self explanatory. This is where you withdraw more money from your account than you have and more than the overdraft limit you have agreed with your bank. Many student bank accounts will simply cut you off before you withdraw too much, but for the rest of us it is much more typical that you will be slapped with high interest rates and fines. It’s important you check this with your bank if you think that might happen, but as a rule it’s best to stick with not withdrawing more than your arranged overdraft.

Overdrafts are decided on a case by case basis
Banks may sometimes offer high potential overdraft limits to make their current bank accounts look more attractive, but it’s important to remember that overdraft limits will be decided generally on a case by case basis. Some banks offer a guaranteed amount that they will allow as an arranged overdraft as an incentive to open a current account with them. If this is important to you, check out the comparison table.

How much am I charged for an arranged overdraft...
Some current accounts offer an interest-free and charge-fee overdraft, which means you can go overdrawn at no extra cost. Beyond that, banks will charge you in different ways for your overdraft, which can make it difficult to compare one bank vs. another. For example, First Direct & M&S offer a simple, transparent interest rate on their overdrafts of 15.9%. However, Lloyds Banking Group (inc. Halifax) don't quote their charges in that way... instead they say that you are charged 1p for every £7 you are overdrawn every day. Don't feel bad about your maths skills if you can't compare the two - it is difficult to compare these rates and that's incredibly annoying for a consumer. You can read more about fee and charge calculations below but in case you are interested 1p for every £7 per day equates to a 68.4% interest rate - much much more than the 15.9% we see at on other current accounts.



Perks and Incentives

Banks like people to sign up for their personal bank accounts, as they hope they can sell you more valuable products in the future, like loans and mortgages. Because of this, many current accounts will offer sign up incentives and extra perks.

How should I think about these incentives?
It can be tempting to look at an offer of £100 cash when you switch accounts and make a decision based on that. After all, who doesn’t want £100 in cash for filling in a form.

Many incentives are very attractive when viewed through the lens of a short time horizon (say a year). But if you think about them over a longer time horizon, they suddenly seem like they don't matter. For example, a £100 signup bonus might be nice now, but over your lifetime it doesn't have a lot of value when compared to something like the interest rates you might get charged on overdrafts or the interest you could earn on your savings. If all else is equal though - go for it!

The solution is to review your current bank account on an annual basis, or at least more often than once in a lifetime. Doing this will mean you can benefit from bonuses in the short term and still be sure you are choosing the right personal account for you for the long term.

Which current accounts have the best signup incentives and perks?
It’s important to note that banks accounts should be reviewed as a whole to truly determine what bank account is best for you.

  • Nationwide offers an interest free overdraft for your first year and 5% interest on balances in the first year. This is great! But, these are teaser rates that reduce dramatically after 12 months. If you sign up for an account based on teaser rates, make sure you remember to review the situation after they expire.
  • Supermarkets like M&S and Tesco often offer points on shopping that you can spend in store.
  • First Direct pride themselves on customer service. They offer a £100 signup bonus and offer another £100 if you decide you are unhappy and close the account.



Charges and Fees on Current Accounts

Should I care about interest rates, fees and other charges?
Yes!!!!

How much will I be charged for arranged overdrafts?
We talk about this a more in our Overdrafts Explainer above. Overdrafts can be difficult to compare, but to combat this we have tried to convert everything to an equivalent annual rate (EAR), which is a comparable interest rate to help you compare different current accounts.

What about interest rates on unarranged overdrafts?
You may accidentally withdraw more than your arranged overdraft limit. Of course, your default position should be that you don’t go over your agreed limit and can live blissfully unaware of what rates your bank would charge otherwise, but it’s probably worth figuring out what you will be charged just in case.

If you check your accounts terms and conditions, they will let you know exactly what these charges will be. Sometime banks charge a flat fee of say £5 per day, and others will charge a flat interest rate of say 20%. Some will charge a combination of an interest rate and a fee. These fees can be pretty large, so please please make sure you have all the facts.



Interest Earned on Personal Bank Accounts

If you plan to be in credit in your current bank account, as opposed to overdrawn - firstly, well done you, and secondly, you should check which current bank accounts offer the best interest rates on savings.

What is AER?
Interest rates are often quoted in AER, which stands for Annual Equivalent Rate. AER is designed to make comparing interest rates easier. The calculation assumes that you keep earning interest over a year and takes into account factors such as compound interest. The bottom line is, when you want to compare interest rates, look for the AER number to ensure you are comparing apples to apples.

Which banks offer the best interest rates?
Banks offer a variety of rates on their accounts:

  • Nationwide have an introductory rate of 5% on your balances up to £2,500 for your first year and then 1% after the year is up.
  • Marks & Spencer and First Direct current bank accounts come with access to a savings account with 5% interest rates.
  • Tesco and TSB have 3% savings rates on certain balances.


Having said that, if you consistently have a reasonably high balance in your current bank account, it may be worth checking out your other options for earning interest.

What are my other options for earning interest?
You may want to look at formal savings options, like ISAs. Perhaps start by checking out our guide to saving and investing.



Credit Cards for Personal Banking

You may also want a personal credit card to supplement your current bank account.

Should I get a credit card?
Using credit cards can result in you being charged interest. However, credit cards can have a range of benefits, like cash flow flexibility, extra rewards (cashback, air miles, etc) or credit building. They can also be free if you pay off your balances in full each month through a direct debit.

How should I think about credit cards?
If you pay off the full balance on your credit card each time your bill is due, you will be able to avoid paying interest. This can be useful if you need a little bit of cash flow flexibility to get you through a short period of time.

Other options for your credit card are paying off the “minimum amount”, which means you will be charged interest on the rest. Since you will probably have an interest free overdraft, this should always be your first port of call.

Do I have to get a credit card with the same bank as my current account?
No. You can select different banks for your personal current account and for your credit card. You just need to figure out what’s best for you.