A current account is for everyday banking, but won’t give much interest. A savings account is specially designed to help you earn interest on your money.
What is a current account used for?
A current account is your main bank account. You’ll use it for lots of things, including:
Setting up direct debits or standing orders
Paying your mortgage or rent
Keeping large sums of money in a current account
Current accounts don’t usually have high interest rates. That means that you won’t earn much extra money in interest if you have cash saved in a current account.
You might be able to earn more money by moving large sums into a savings account.
What is a savings account used for?
A savings account is made specially to save money with. You wouldn’t use a savings account as your main bank account. For example, you wouldn’t have your wage paid into one (but you might have a standing order to pay into a savings account each month).
A savings account may have limits on how often you can withdraw money or how much you can pay in. The interest rates on a saving account will generally be higher than the interest rate of a current account.
Main differences between a current account and a savings account
Withdrawing money - Savings accounts may have limits on how often and how much you can withdraw.
Cash – A current account comes with a debit card to take out cash from an ATM, a savings account probably won’t.
Overdrafts – A current account can come with an overdraft in case you go below your balance. A savings account won’t.
Balance – You may need to pay a set amount into a current account, e.g. your monthly or weekly salary, to open one. The balance needed for a savings account can be much lower.
Direct debit and standing orders - You can set up a standing order to come out of a current account into a savings account, but not the other way around.
Types of savings account
There are lots of savings accounts on offer – here’s how they work:
A Cash ISA is a type of savings account that offers tax-free interest. That means you’ll be able to keep all of the interest you earn, as long as you stick to the conditions of the account. If you are over the age of 16, you can open a Cash ISA with £1.
Fixed rate bond
Fixed rate bonds are a type of savings account that pay a guaranteed rate of interest. You pay in a lump sum that’s held for a set amount of time, called a term. The interest rate will stay the same for the term of the account.
Regular savings account
A regular savings account is for people who want to save every month towards a goal. There may be limit on how much you can pay in and how often you can withdraw money from this type of account.