Current Accounts vs Savings Accounts – Which Should You Choose? #AD

Paid collaboration with HSBC.

We all need at least one bank account. We need them for so many reasons these days. Most employers will only pay wages into bank accounts, and many bills have to be paid via direct debit or bank transfer. But should you have a separate savings account too? And with interest rates at an all-time low at the moment, is there any need to open up a savings account or will a current account work just as well?

What is a current account?

A current account is usually your main account for your day to day living expenses. This will often be the account your wages are paid into and the account that your bills are paid from. Sounds simple, doesn’t it? But depending on your specific needs and wants, many banks offer different options when it comes to opening a current account.

With an HSBC current account (eligibility criteria and T&Cs apply), you can opt for a basic current account that simply allows you to make deposits and withdrawals and is a great option if you just want to use an account for wages and bills. You’ll usually get a debit card with any current account unless you specifically request not to receive one, and this can be used to pay for goods either in-store or online with the money being deducted from your current account. Or, if you’re looking for an account with a little more flexibility, you could apply for their Standard Current Account. Unlike the basic accounts, with standard accounts, you have the option to have an arranged overdraft which some people find gives them the peace of mind that any unexpected bills will be covered.

And then you have the option of current accounts with added extras such as various insurance products and access to different products. These accounts usually come with a monthly fee attached, so it’s worth weighing up whether you’ll benefit from this in the long term.

What is a savings account?

Since paying off debts and working towards a better future, I’ve become a big saver and I’ve learnt an awful lot about savings accounts over the last year or so. It’s true that interest rates are at an all time low at the moment which is great for borrowers but not so great for savers. But it’s still important to put some money away each month if you’re in a position to do so. But what is the difference between a current account and savings account?

Firstly, the most obvious difference is that savings accounts aren’t typically used for day to day living costs and expenses. In fact, some savings accounts will require that you don’t touch your money for a given length of time in order to receive the advertised interest rate.

Savings accounts also don’t typically come with debit cards so they can’t be used to make purchases. Their primary purchase is to save money. There are all kinds of reasons why you might want to save some money, and you should choose a savings account that works for that purpose. For example, if you’re looking to save money for your retirement and you know you won’t want to touch it for many years to come, then you can choose a fixed-rate savings account. These accounts will usually offer a higher rate of interest but will require that you don’t make any withdrawals for a set number of years. As a general rule, the longer you’re prepared to keep your money in the account, the higher the interest rate.

If you’re saving up for a large purchase such as a car or some home improvements, then you might want to think about an account that you can access and withdraw from at any time. There’s no limit to the number of regular savings accounts you can have, so you can use separate accounts for saving up for different things. For example, you might have one savings account for your emergency fund, another for Christmas and yet another for any individual items you’re saving up to buy.

When it comes to longer term savings, you might want to think about an Individual Savings Account (commonly known as an ISA). The key with these accounts is that you can save a certain amount of money each year without it being taxable. You can only have one of these accounts.

Managing your finances is really important, and I’ve found it really useful to use a few different accounts in order for us to keep on top of our bills and build up our savings. Take some time to work out exactly what you want from your bank accounts and choose the accounts that work best for your personal circumstances.