Current Account Management

Some people are naturally better - or naturally worse - than others at running a current account and managing their money well.

If you think that there is room for improvement with the way that you manage your current account, then here are some hints and tips for you with regard keeping it running well.

The first tip is to never, ever use your overdraft if you can avoid it.

A lot of people have a savings account and save a set amount into it each month. This is really good. BUT not if it means going into your overdraft in order to hit your savings target for the month.

The reason this is not a good idea is simply because the interest on your overdraft is almost certainly going to be more than the interest on your savings (possible exception: Student with a zero percent rate on their overdraft).

So as a rule tip one: always keep your account in the black. This may sound obvious but so many people don't watch the level of their current account and end up getting hit with fees (sometimes called 'paid referral fees') for going into their overdraft - avoid that shock and watch your account carefully.

Another tip, and one which helps avoid the above, is to have a 'float' whereby you always ensure that you have a few hundred pounds in the current account to stop overdraft situations arising.

Some bank accounts have the facility to allow you to automatically sweep money above a certain amount into a savings account each month, or even each day, and this is great for ensuring you never have money in your current account that could be working elsewhere.

Tip three is never to have more than £1000 in your current account (unless you have a very specific reason like you are about to take it out!).

That's because on the typical high street bank account in the UK you might be getting around 0.1% interest - yes that's right, practically nothing.

However a savings account with the same institution could be earning you over forty times more than that, which means that the same cash just by switching the database it is held in with that bank could be working so much harder for you.

Be diligent with your money and if you get a build up in the current account move it elsewhere so that it can make you more money as soon as you possibly can!

Tip number four is to use the money in your current account wisely each month. This means that if you have a loan and a savings account, always use the money to pay off loans as quickly as possible and foresake saving in those months.

Whilst psychologically it might feel better to have a hundred pound saved into a savings account each month and pay off a bit of the loan, if you want more cash at the end of the whole process, it is better to pay off more of the loan (assuming there are no overpayment penalties) than saving the money.

That's because the interest rate on the loan is almost certainly greater than that on your savings, meaning that in the long term the loan is going to cost you more by not paying it off quicker than the excess you will get on your savings.

So much to think about, but these are some good simple tips for helping to run your current account well.

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