One of the first things necessary to do when moving to London will be to open a UK bank account. Having a UK bank account is virtually essential for such things as receiving your salary, keeping cash safe and for setting up automatic payments for items such as a mobile phone (cell) and your monthly utilities.
What banks are there for me to choose from?
In the UK, you have two choices of banking. You can set up an account with a bank or with a building society. The difference between them is that banks are generally listed on the stock market and are owned by and run for the shareholders. However, building societies don’t have shareholders and were set up as mutual institutions, giving account holders member status and certain voting rights on the societies issues.
There are many banks and building societies to choose from. Some are small institutions, and others global that may even have a presence in your own country as well. Banks such as HSBC and Barclays with branches all over the world provide the opportunity to open a UK account before you even leave home soil.
Other large banks and building societies in the UK include:
Each has their own rates of interest and various offers to tempt you to open an account with them instead of one of their competitors. For personal banking, the account you’ll most likely require is called a current account (perhaps known as a checking account in your home country).
A current account allows you to pay in money, set up direct debits and standing orders, have an overdraft facility if required, as well as giving you a chequebook and debit card.
What documents do I need to open an account?
No matter which bank or building society you choose, you’ll have to provide documents for proof of ID and proof of address. You cannot use the same document for both. Your passport will suffice for proof of ID, and most people use a utility bill issued within the last three months for proof of address.
However, if you’ve just landed in the UK, or perhaps you’re lodging or don’t yet have a permanent address, the proof of address document can be a little challenging. But there are ways around this, such as the following:
First, ask your landlord/hostel owner/friend you trust if you can use their address on a temporary basis. Then, carry out one of the following:
Apply for a prepaid credit card – once this is sent out and arrives at the address at which you’re currently staying, this counts as proof of address.
Change the address on your bank account in your own country to your current one in the UK. Print off an online statement and you have your proof of address.
If you have a contract of employment and your HMRC P2 ‘PAYE Coding Notice’ that tells you what your tax code is, this is normally sufficient as proof of address alongside your passport.
Other challenges for expats opening a bank account
Once you’ve overcome the proof of address issue, the other major stumbling point might be that most current accounts require you to have a good credit score. If you’ve never been in the UK before, then you’ll likely have had no chance to build up your credit rating – which is taken from things such as paying bills on time, having borrowed money in the past, using credit cards etc. Most banks use one of the credit agencies, Experian and Equifax.
Now, banks that specialise in setting up accounts for expats, such as HSBC, Barclays and Santander take this into account. But problems might occur for international students studying in the UK who’ve not yet had any chance to build up a credit score in any country of the world.
In such a case, the alternative might be to open a basic bank account. This type of account allows you to receive money, pay bills by direct debit or standing order, pay in cheques and cash, withdraw money from an ATM and some also give a debit card. But most importantly, such an account doesn’t require you to have a good credit history. Most UK banks and building societies offer a basic bank account service.
What type of accounts are their available to open?
The different types of bank accounts you’ll come across include:
A current account – As mentioned earlier this is the account most people use to manage their day-to-day money, pay bills, receive salary, pay for things with a debit card and have access to an overdraft (if authorised by the bank).
A packaged account – the same as a current account with extra features. These can include car breakdown cover, travel or mobile phone insurances, and special offers such as preferential interest rates on overdrafts. For these benefits you pay a monthly fee (typically £10-15 a month).
A basic bank account – for those with poor or no credit history that allows you to receive money and pay bills by direct debit or standing order.
A jam jar account – or a budgeting or rent account. You can divide up your money into different ‘jars’ to allow you to budget for your bills, and how much is left over for saving or spending. They allow you to pay bills by direct debit or standing order and to receive payments such as your salary. These accounts charge a monthly fee.
A student or graduate account – as the name suggests, an account specifically for students. It usually includes an interest free overdraft.
How do I decide which bank to open my account with?
With the amount of accounts available, each extoling their virtues, it can be a bewildering choice to know which one to open. You’ll need to decide what charges and features you want, and compare them. These might include:
Fees, charges and overdraft costs
Interest rates on credit balances
Incentives (such as a monthly credit of £5, or a lump sum when you first open an account)
How you want to deal with your bank. Online, over the phone or in person.
Thankfully, there are some great comparison websites that do all the hard work for you. These include The Money Advice Service (set up by the government), Money Supermarket and Money Saving Expert.
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