Bank & Building Society Accounts

Bank - an institution which:

  1. takes deposits from individuals, companies, organisations etc. and provides them with various financial services
  2. pays interest on deposits, which may be fixed or variable, but which usually vary according to the amount of money deposited and the amount of time it stays in the account
  3. makes loans and charges interest on them

Banks operating in the UK , formerly regulated by the Bank of England, are now authorised and supervised by the Financial Services Authority. In the USA , banks are regulated under the Federal Reserve System.

Building Society

'Mutual' non-profit-making institutions set up to lend money to their members for house purchase. Building societies are 'mutual;' because their members own them, and their members are entitled to their profits and benefits.

The Building Societies Act 1986 enabled building societies to provide a much wider range of services to their members, including unsecured personal loans, insurance policies, house selling, and pensions. This was designed to put them on a level playing field with banks.

In recent years, some of the UK 's largest building societies have demutualised and effectively turned themselves into profit-making banks, with their profits being distributed to shareholders rather than their customers.

The Financial Services Authority (FSA) regulates Building Societies.

Current account

  1. A bank account, which offers a number of facilities including cheque book for debt settlement, deposits, direct debits and where applicable, overdrafts. This type of account is normally used for ongoing transactions (for example monthly direct debits and writing of cheque etc.) as opposed to a deposit account.
  2. A balance of payments account listing transactions other than capital movement.
  3. An account listing transactions between trading companies.

Savings account
An account with a bank or financial institution which pays interest on balances held, usually once or twice per year, the amount of interest usually depending on to the amount of money in the account and the 'base rate' of the Bank of England. There is often a notice period required for withdrawals and in most cases the longer the notice period, the higher the interest rate.

Budget account
A bank account set up to control a person's regular expenditure. The account would typically include the payment of such items as mortgage, utilities, telephone and other similar items. Annual expenditure for each item is divided by 12 and paid into the account monthly. The bills are then paid from the budget account as they become due.

Sweeper (offset) account
A bank account, which offsets the cash held in a depositor's account against credit card, loan and mortgage debts to reduce the debit interest payable on them. Often it will automatically transfer surplus funds held in a depositor's current account to his or her deposit account where the money will earn higher rates of interest.