Banking basics

Banks are safe, secure places to keep your money. You can put money into a bank account and take money out of a bank account. Your money is protected much more than if you don’t use a bank (or building society).

The are different types of bank account suitable for different needs and situations. The most common and used is a current account. Most are free. With a current account people typically pay in their weekly or monthly wages, any benefits, they pay out any bills, any debit card payments. It is a general basic account for day to day living and activities. It helps you people track and in control of your spending. If you spend more than you have in the account you risk the potential problems of becoming overdrawn. This means you have spent more money than you have and owe money to the bank. You have borrowed more than you have and if you are overdrawn there will be expensive charges and it can become hard to pay the money back and you will have to pay back more money.  You need to be careful, make sure you plan as much as possible and budget for your costs. 

Current accountstypically come with a debit card which when you use the card to purchase items, the money is taken straight away from your account that is is automatically connected and normally  free. It can be much easier to use a debit card than carry lots of cash around and typically there are no costs to do this. You can spend as much money as is in your account in a current account. You can also withdraw cash with a debit card from a cash machine (ATM.)A Debit card also uses chip and pin where you use a PIN number providing security as you need to know the PIN. You must never share your PIN with anyone, even your bank. Some will pay interest (small amount of money for you having the account). For current accounts if there is interest it will be a very very small amount if anything.

To get money out of a current account typically you can via a branch, talk to staff in the branch or use a cash machine (ATM) such as at a branch. You can also access your money via telephone or online. You will get statements from your bank. These detail the amount of money you have in your account any give details like of money going in, going out, anything you have purchased.

Credit Cardsgive you credit meaning they lend you money for a short time and you pay back this money later when you pay your bill. They are not linked to your bank account and it is your responsibility to pay the bill or set up an arrangement like a direct debit. The bill is  sent to you once a month. The cards generally give you good protection such as against Fraud when buying things (better than debit cards) but can be very expensive to use if not paid off each month in full. Fraud is when someone Criminally misleads another person to obtain or try to obtain financial gain.

Credit cards can be useful paying for an item when extra protection may be good and when the item is expensive. People often use credit cards for items like holidays or flights or expansive items. They also use them when they do not know a company that well or when buying online so they get more protection should things go wrong.

If you do not pay the money you owe each month on a credit card by a set date you pay interest (extra money you owe) for borrowing the money. You need to know and understand the credit card interest rate percentage and what this means. You have to make sure you are very responsible, and are good at budgeting to have a credit card and be able to manage it well.

One way to manage some of your regular bills is by setting up Standing Orders. These are regular payments you control. Alternatively Direct Debits are payments you set up with a company to pay a regular bill that they (the company) control. Both take the money on a set day each month helping you manage your bills and there for finances and spending. To stop this payment speak to your bank or the company you have the arrangement with. Also for these to be set up they do need your consent. 

Savings accountshelp you save for the future and pay interest. Some allow you to put a set amount in each month. They are not intended for you to pay money out of regularly but for planning for the future and leaving the money for some time. A popular common type of savings account is a Individual Savings Account or ISA these are tax free savings up to a certain amount each year that have good interest rates. There are two types of ISA a cash ISA that pays a set interest rate and a Stocks and Shares ISA that goes up and down depending on the stock market performance. Some savings accounts let you access the money whenever you need, they are instant access, while others you have to wait until the end of a fixed term (fixed time period).

Loans are money let to you that you must pay back and also pay interest on. You can get loans from different places like banks. You must be careful of the interest rate (APR). The higher the percentage the more you pay. Some loans are meant to be very short term like Pay day loans and the interest is very very high. If you have to pay high costs you are likely to get into debt. This is were you owe more than you have. This is very risky as debts can grow very quickly much higher than you can repay. You must understand how much money you have each week/month, and be very careful.

Be careful and think do you really want to get a loan. If you have financial problems look for trusted support. If you get a loan avoid Pay Day loansas the interest is so high making the, hard to pay back. Also always avoid loan sharks. These are not regulated, trusted or allowed. They charge very high interest rates. 

There are lots of organisations supporting money problems. These include the free Citizens Advice service run by well trained volunteers that can offer advice on financial issues like debt. There are lots of money comparison sitesthat are easy to use and compare prizes from one place so you can shop around easily, never paying more than you need too. You can use them for free 24/7. The Money Advice service explores financial issues and provides well informed advice, the service is also free and is government funded. There are FCA  regulated services like debt counsellors and help with debt repayments like from Individual Voluntary Arrangements.

If you get into debt you can get a bad credit scoremaking it harder in the future to borrow money. You would not be able to get a mortgage or rent a property. You may get bailiffs round allowed by the courts to collect items of value to cover your debt.

Banks have a responsibility to ensure money left with them is not stolen. They must make sure they know the identity of everyone who uses the bank and must do checks on people’s identity and keep a record  as part of a law related to something called Customer Due Diligence. It is to stop the handling of stolen money as is the law requires under Money  Laundering regulations. This checks money is obtained from a trusted source and not gained illegally. This means backs check our identity using trusted identification like your passport and other trusted documents. 

To pay money into your account you will need your bank card and a paying in slip you have filled in as well as the money you want to pay in or the cheque. The paying in slip needs you to add the date you are paying the money in at the top, you need to add your full name where it says paid in by and you need to put the amount paid in. You can take money out of an account by visiting your bank, visiting a cash machine or getting cash back when you buy something at the supermarket.

Banks also if needed must make ‘reasonable adjustments‘ to help you overcome any difficulties due to your disability so for example can offer banking information in alternative formats like easy read or Braille or large font. It could be offering an alternative to Chip and Pin if you find recalling the number different or it could be spending a little extra time checking you understand or ensuring there is suitable access to the building. It depends on the disability and that person’s situation and needs.

See also the money management resources on this website for more on banking as well as the budgeting section.