Don't be swayed by offers of free gifts or cash; it is important to shop around and make sure the bank or building society you choose is right for your needs. And, remember, you can have a variety of accounts with different banks.

What's the difference between a bank and a building society?

Banks are owned by other people, usually publicly-owned and floated on the stock market. Building societies are owned by the people who have accounts with them, and are also known as mutuals. This means they can usually offer better rates, as they don't have to make a profit, but they are also limited as to how much money they can borrow from other places.

Traditionally banks offered current accounts, and building societies offered mortgages and savings accounts, but these days most institutions offer most things. To make things easier we've referred to banks below, but this could also mean building societies.

Important factors when choosing a bank include:

• The location, particularly if you are likely to visit your branch on a regular basis. Banks are usually open office-hours only, so you'll need to find a bank close to work or college.
• Access to telephone and internet banking. It's useful to be able to check your finances in your pyjamas.
• You should find out how many cash machines you'll be able to take money out without being charged. Different banks have different policies about charging for using other banks cash machines.
• Cashpoint functions: Can you deposit money? Can you get a printed mini-statement? Can you order a cheque book?

The MoneySupermarket.com website allows you to compare high street bank accounts and work out which would be best for you.

Internet and telephone banking

Internet banking is now offered by most banks. You can even have an account run almost completely online through companies like Egg, Smile and Cahoot.

Internet banking is useful if you do not have time to go to a branch during normal business hours. You can carry out the majority of your banking whenever it suits you. You also have instant access to your statement, so you don't have to wait until the end of the month for a breakdown of how you've spent your money.

If you don't have regular access to the internet, telephone banking is another option. This is where you can carry out banking functions over the phone. Again, most banks offer a form of telephone banking.

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 it's worth moving any excess money to a savings account.

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 statements to make sure all the details shown are correct and contact your bank if you have any queries with the transactions shown.

How to open a bank account

Anyone can apply to open a bank account, but banks don't have to accept you. Unless they are discriminating against you on the grounds of race, sex, disability, religion or sexuality, there is nothing you can do about it.

You will usually have to provide two forms of ID, such as a passport and a utility bill. If you don't have sufficient ID, they may accept a letter from a responsible person.

If you are on a low income or have a bad credit history, you may find it difficult to open a bank account. In those circumstances, you may be able to open a basic bank account.

How to change bank accounts

People often stick with the same bank for all of their life, but shopping around can get you a better deal. You should be able to automatically move your direct debts from one account to another, but remember to tell your employer that you are changing banks so they can arrange for your salary to be paid into your new account.

Thanks to CAB for help in providing this information.

Updated: 09/01/2013