Understanding bank accounts
Why do people use bank accounts?
Before we get started, you might be wondering why people choose to keep and manage their money in a bank account. How does it benefit people in the short and long term? Here’s a few examples:
Day to day finances
Having your money paid into a bank account can often mean you get access faster and more conveniently. Most current accounts give you access to your money through a card or banking app, which you can use to pay for things you need throughout the day, without the need to carry cash around.
Lots of companies offer online accounts and apps so you can check your account balances and statements easily.
Shopping online
Shopping online lets you buy what you need in just a few clicks. When you pay with Bank Pay or your debit or credit card, purchases are listed on your statements so you can keep track of your spending.
New regulations on payment services have come into effect when making online payments to help protect against fraud. When making a transaction, you might be asked to confirm it’s you by logging into your banking app and authorising the payment, or entering a code you receive by text message or notification to confirm it’s you that’s making the transaction.
Contactless payments
You may find some retail outlets or venues are now completely cash-free, only accepting payments through card or contactless transactions.
Contactless payments are when you use your card or mobile device to make a payment without having to enter your PIN. You can do this whenever you see the contactless symbol, touch the reader with your card or mobile device and wait for confirmation your payment has been accepted. There maybe times when you're asked to enter your PIN to confirm your identity.
Credit scoring
Your credit score is used by lenders to judge how risky it would be to offer you credit. It’s worked out using information like your age, job, and existing financial commitments. You can check your score with credit reporting agencies like TransUnion, Experian or Equifax.
If you don’t have a credit history, it’s hard for lenders to trust you’ll be able pay back what you’ve borrowed. Using your credit score, they’ll judge whether you can have a phone contract, finance a car, apply for a mortgage, or even shop with ‘buy now, pay later’ benefits.
Looking after your credit is a big part of setting yourself up for plans you may have in the future. Here are some things to think about now for the benefit of later:
7 tips to stay on top of your credit
Peace of mind
Depositing and managing your money through banks, building societies and credit unions reduces the need for you to carry physical cash. They have a duty of care to keep your money safe and secure by monitoring accounts for suspicious activity.
The Financial Services Compensation Scheme (FSCS) protects eligible deposits up to a total of £120,000 with banks, building societies or credit unions authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA) to do business in the UK.
For more information, please visit the 'Financial Services Compensation Scheme' website. You can use their 'Bank & savings protection checker' to check if your money is protected.
Choosing how you manage your finances is a personal choice, but support is available if you need it. Consider what works best for you in your personal situation to help make managing your finances as easy and simple as possible.