As part of our personal finance advice for young people, here is a quick article outlining how to open a bank account. These may appear like trivial steps, but I guarantee that at least a third of people forget the important 6th step, and lose money as a result!
Step 1. Shop around and find a bank account that has the features you want.
- Look at how much interest the bank account will pay you (this may be called ‘AER’ or ‘Annual Equivilent Rate’).
- Find out how easy it is to withdraw money, and whether there are penalty charges for doing so.
- Understand the charges and fees for using various services, as well as whether there is a monthly fee.
- Find out how you can contact the bank, as some accounts are online-only, or telephone and post-only.
Step 2. Find out how you apply for the account.
- The banks website will clearly explain how to apply for a bank account.
- Sometimes you will need to visit a local branch, and other accounts can be opened purely online or by telephone.
Step 3. Fill out the application form.
You will usually need the following pieces of information:
- Your address, date of birth and date of birth.
You may also need to provide the following:
- Proof that you are a student (for student bank accounts)
- Proof that you earn over a specified amout (for some current, regular saver or private bank accounts)
- Proof that you live at your address (usually you will need to send in recent utility bills that have you name and address on).
Less details will needed if you already have another bank account with the same bank.
Step 4. Make a deposit
At the end of the application form, you will usually need to tell the bank how you will fund your first deposit. Most bank accounts have a minimum deposit of between £1 and £50. Without this deposit, the bank account will not officially be opened.
- If you are applying in the branch, you can use cash, cheque, bankers draft, debit card or bank transfer.
- If you are applying online, you will usually be asked to use a debit card or bank transfer
Step 5. Receiving your cards & documents
To run a current account efficiently, you will need a debit or cashcard, a cheque book and your bank account number and sort code. For a savings account, you will need either a savings book or a debit card. Without these, it will be difficult to make payments or transfers, or prove to your local branch that you own the account. Therefore receiving your documents is important before you begin to use your bank account. If you are receiving a debit or credit card, the card and pin number will arrive separately for security reasons.
Step 6. Claim your tax back.
This step is important, especially for teenage savers and students, but is often forgotten. The bank will automatically take a 20% tax off your interest before it is paid into your account. If you earn less than the personal allowance (£7,475 – 2011) per year, then you shouldn’t be taxed at all. Therefore you must fill in a form called R85 and send it to your bank to tell it that it should pay you the full amount of interest from now on.
If you forgot to tell the bank this straight away, and you would like to claim the tax back that it has already taken, use a form called the R40, which you send to HMRC (the tax people).