Choosing a bank

Choosing the right bank or building society can be a confusing process.

Don't be swayed by offers of free vouchers and CDs or prize draw promotions; it is important to shop around and make sure the bank or building society you choose will actually offer the right account for your needs. Remember, you can have a variety of accounts with different banks.

Important factors when choosing a bank include:

• Location: particularly if you are likely to visit your branch on a regular basis
• Accessibility to ATMs (automated telling machines, or cashpoints)
• ATM functions: Can you deposit money? Can you get a printed mini-statement? Can you order a cheque book?

The Guardian Money site allows you to compare high street bank accounts and work out which would be the best for you.

Telephone and internet banking

• Telephone banking is an excellent way of banking if you do not have time to go to a branch during normal business hours. You can carry out the majority of your banking by phone and fax. A lot of high street banks offer a telephone banking option often available 24 hours a day, 365 days a year, giving you the freedom to make transactions and enquiries whenever you want to.

• Internet services offered by banks (cyberbranches) have improved in leaps and bounds over the past couple of years in the UK. You can even have an account run almost completely online through companies like Egg, Smile, and Cahoot, which are known as standalone internet banks.

The majority of telephone and internet banking services allow you to:

• Check your account balance
• Transfer money between your accounts and pay bills
• Amend or cancel standing orders
• Apply for other products or services from your bank or building society

The online branches of high street banks are varied in the quality and quantity of services offered, however most allow you to do all of the above. The advantages of standalone internet banks are that their running costs are lower so they can offer customers higher interest rates, and they are 24-hour. However there are potential downsides, including security (how safe is your financial information from hackers?), and the fallibility of computers, so you might be back down to the high street branch anyway! Some standalone internet banks are also limited in the types of accounts and services they can offer so look carefully before choosing.

Current accounts

Current or bank accounts are the most popular ways of organising day-to-day finances. When you open a current account, you will usually receive a cheque book, a cash card and, if you are over 18, you will have the option to apply for an overdraft. Generally, money is credited to your account from whatever source you receive your income (your salary if you are working), and then any payments or withdrawals are made from the pool of money in the account.

Direct debits and standing orders can also be set up for monthly outgoings (such as bills or rent). Current accounts do not pay a significant amount of interest when you are in credit, so if you have a lot of savings, it might be a good idea to look for a savings account that pays higher interest on larger amounts.

Statements

Statements show the transactions that have taken place in your bank account over a pre-determined period of time, usually a month. Always check your bank account statements to make sure all the details shown are correct. If you have any queries with the transactions shown, contact your local branch, or if available, you could use the telephone or PC banking service.

How to change banks

If you do decide to change banks you should always arrange the transfer of your direct debits and standing orders before you close your old account. Some banks and building societies can provide transfer packs that contain information to help you do this. Remember to inform your employer that you are changing banks so they can arrange for your salary to be paid into your new account.

Thanks to Abbey National for help in providing this information.