Introduction to Banking

Here's what you need to know if you want to open a bank account.

You can also check out our article about how you can use your bank account when it is set up.

Bank accounts

A bank account is a place where you can keep your money, managed by a financial institution like a bank or a building society. There are more details on the difference between these further down this page.

You can put money in, this is as a deposit. Or, you can take money out, this is a withdrawal. You can pay money in or out in the form of cash, cheques or digital transactions.

There are different types of bank accounts.

Current accounts

This type of account helps manage your day-to-day spending. You use a current account for things such as:

  • paying bills,
  • paying for shopping or other goods,
  • paying for subscriptions or other services,
  • getting paid from a job,
  • getting other income such as benefits.

Some current accounts offer other services such as an overdraft which lets you spend more money than you have in the account. This has a limit and you will have to pay the money back within an agreed time frame or face a fee.

Savings accounts

This is an account where you put the money you want to keep for long-term goals. This could be for buying a car, a house, going on holiday or even your retirement.

It is also a good idea to have three months' worth of living expenses saved for emergencies.

Savings accounts may also come with an interest rate. This is a percentage that you can earn on the money you save and is usually quite low.

You can find more information about savings accounts and opening one in our article.

Basic accounts

This is a bank account that offers fewer services than a current account, for instance, they don't have an overdraft. With a basic account, you can still do things like get paid, pay your bills and take out money.

These are a good choice for you if you aren't able to get a current account or have a poor credit history.

Learn more about fee-free basic accounts on the Money Helper site.

Joint accounts

You can open an account for yourself, or you could share one with someone such as a partner or a flatmate.

This can be useful if you share household bills with someone and want to manage them together.

How to open a bank account

To open an account you need to go through the bank or building societies application process. This will include providing information either online or in person at a branch.

You will need to share personal information such as your name and address and give ID documents. Some banks may accept your Young Scot NEC as a form of ID, such as:

  • The Royal Bank of Scotland (RBS) (can only be used as voluntary proof of age if you are under 20),
  • Natwest (can only be used as voluntary proof of age if you are under 20),
  • Clydesdale Bank (can only be used as voluntary proof of age if you are under 18),
  • Bank of Scotland.

You can open your own account once you turn 16. However, many banks offer accounts for under-18s that a parent, carer or guardian can help you set up.

You can find more information about setting up a bank account on Citizens Advice Scotland's site.

Or, you can check out our own article that walks you through the process.

Bank vs building society

Banks and building societies are places where you can open accounts to pay in and take out your money as you need to. Both are financial institutions that use the money paid in by you and others to lend to people. For example, they can give mortgages to people looking to buy a house.

Where they differ, is who owns them. Most banks are listed on the stock exchange, check out our investing glossary article for an explanation of what this is. People who invest in the bank are shareholders and they own the bank. These people get payments, also known as dividends, from the profits of the bank.

Building societies aren't listed on the stock exchange and don't have shareholders. They are an organisation owned by its members. Members are customers of the building society who hold accounts there or have taken out a mortgage. Members get a vote in decisions related to the running of the organisation, such as appointments of directors. 

There are pros and cons to both.

For instance, there are many more banks than building societies and so it can be easier to find a bank branch near you. You will also get a larger range of products at banks. However, because they pay profits out to shareholders most interest rates are quite small.

Building societies can offer a more personal service and pass on more of their profits to customers. However, they aren't as convenient as banks because there is a limited number in the UK.

Bank cards

When you open a bank account, you get a card. You can use this to help you pay for things online or on the go using the money in your account. You can also use them at the cash machine to do things like:

  • withdraw money from your account
  • check your balance,
  • pay in cash or a cheque, this will only be available at your own bank’s machines.

There are two basic types of cards you can get from a bank, debit and credit.

Debit card

This is the card a bank would give you when you open an account.

It allows you to spend or withdraw the money that is in your account.

Credit card

A credit card works differently and you have to apply for one rather than get it with an account.

It lets you spend money that belongs to the bank, which you then have to pay back later. There are more conditions that come with a credit card because it lets you use money that isn't yours.

Find out more about credit cards in our article.

Information on a bank card

The layout of your card will depend on the bank that issued it. Most bank cards will have the following information either on the front or back:

  • the bank that issued it,
  • your name,
  • an expiry date,
  • a long card number - usually 16 digits, this information helps you pay for things online or over the phone,
  • a smart chip - this helps you pay for things using contactless payment or by combining with a PIN number,
  • the payment network the card uses, for example, Visa or Mastercard.
  • a magnetic strip - this holds information about you and the card and helps you pay by swiping the card,
  • a hologram - a security feature,
  • your bank's contact information,
  • a signature panel - you have to sign here for the card to be valid,
  • a security code - usually 3 digits, you need this to buy things online or over the phone.

Get more information about managing your money through our Money & Me campaign.