# How do banks (in the UK) make money from current accounts? **URL:** \ **Category:** Factual Questions\ **Created:** [October 13, 2019, 11:05am UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712 "2019-10-13T11:05:03Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Calavera](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/calavera/32/70_2.png) [@Calavera](https://boards.straightdope.com/u/Calavera)\ **Post date:** [October 13, 2019, 11:05am UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/1 "2019-10-13T11:05:03Z")
I know in the US banks generally charge for having a current account, and also charge for a lot of the services we generally get for free. In the UK the banks are competing with each other to a ridiculous degree, offering massive “switching bonuses” of up to £200 just to switch your account. I don’t understand where they make their money though as they are generally free, almost all services are free, and they also offer interest rates higher than the best savings accounts for the first couple of thousand. So they’re encouraging people to come in, take a nice starting bonus, take advantage of all the banking services for free, get a good interest rate on their first couple of thousand, then put the rest in a savings account elsewhere. I dun geddit. ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [October 13, 2019, 11:17am UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/2 "2019-10-13T11:17:48Z")
What is a current account? Banks make money on deposits by using them to fund loans. ---
**Author:** ![Calavera](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/calavera/32/70_2.png) [@Calavera](https://boards.straightdope.com/u/Calavera)\ **Post date:** [October 13, 2019, 11:26am UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/3 "2019-10-13T11:26:25Z")
> [@friedo](#): > > What is a current account? > > Banks make money on deposits by using them to fund loans. If you don’t know what a current account is, maybe you shouldn’t be the first reply on a thread about banking. Given the low level that current accounts are kept at, all the work the banks need to do to maintain customer transactions, and the fact that they offer good interest for the first thousand or so, they won’t be financing many loans compared to their expenses. ---
**Author:** ![Banksiaman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/banksiaman/32/3334_2.png) [@Banksiaman](https://boards.straightdope.com/u/Banksiaman)\ **Post date:** [October 13, 2019, 11:54am UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/4 "2019-10-13T11:54:42Z")
Sir! Sir! I know what a current account is. Pick me, I’m ever so clever! Part of the answer is that customers are essentially lazy. No stats to hand but a sizeable proportion of people still die banking with the same bank that they had their first ever account with (recent Australian data from the Banking Royal Commission). Once someone has their main account(s) with WankaBank, they tend to procure all of their subsequent banking services from the same provider. Its these, with their plethora of small but persistent monthly fees, over-limit levies, additional charges, late payment penalties, ‘fee-charging fees’ etc that provide a steady stream of income for the bank. That’s a lot of money coming in for relatively little outlay by the bank to entice new customers who are then likely to stay. And if they get a home or business loan from them, then its the cherry on top of the gravy on top of the golden egg. ---
**Author:** ![Isamu](https://avatars.discourse-cdn.com/v4/letter/i/7c8e57/32.png) [@Isamu](https://boards.straightdope.com/u/Isamu)\ **Post date:** [October 13, 2019, 11:56am UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/5 "2019-10-13T11:56:57Z")
A UK white paper found that consumer banks make money out of thin air by signing real estate and business loans. After a loan contract is agreed upon numbers representing cash turn up in your account, then (in the case of a real estate loan) those numbers get transferred to the seller’s account and the buyer now owes that (numbers) money to the bank. Of course, in order to start that system you would need a large amount of capital but banks have that. They got that by making investments with deposited cash. Now they do both. > **[Money creation in the modern economy](https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy)** > > Quarterly Bulletin 2014 Q1 ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [October 13, 2019, 12:02pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/6 "2019-10-13T12:02:06Z")
> [@Calavera](#): > > If you don’t know what a current account is, maybe you shouldn’t be the first reply on a thread about banking. Or maybe, if you’re the one looking for information, you might seek to clarify what you’re asking so that people can help you. Has it occurred to you that people in different places sometimes use different words for things? FWIW, the only definition of “current account” that I’m familiar with is as opposed to the idea of a capital account in macroeconomics, but it appears you’re talking about a retail banking product. In which case, the answer I initially gave is still correct. > [@](#): > > Banks make money on deposits by using them to fund loans. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [October 13, 2019, 12:10pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/7 "2019-10-13T12:10:47Z")
> [@friedo](#): > > What is a current account? I wonder if **friedo** is being sarcastic. Don’t savings (passbook) accounts come with ATM cards, direct deposit, etc. in the U.S.A.? Are checks the only advantage current accounts have over savings accounts? I only see about two checks per decade these days. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [October 13, 2019, 12:20pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/8 "2019-10-13T12:20:57Z")
I figured that “current” was just an adjective, here, and that a “current account” was just one that had not yet been closed. So, yes, an explanation of just what a “current account” is would be useful. **septimus** , yes, American savings accounts do often have such features. Which still doesn’t answer the question of what a current account is. ---
**Author:** ![Calavera](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/calavera/32/70_2.png) [@Calavera](https://boards.straightdope.com/u/Calavera)\ **Post date:** [October 13, 2019, 12:34pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/9 "2019-10-13T12:34:59Z")
> [@Chronos](#): > > I figured that “current” was just an adjective, here, and that a “current account” was just one that had not yet been closed. > > So, yes, an explanation of just what a “current account” is would be useful. > > **septimus** , yes, American savings accounts do often have such features. Which still doesn’t answer the question of what a current account is. A current account is, as the name implies, an account that you use for day-to-day transactions, such as paying in your wages, getting money from ATMs, paying with a debit card, direct debits, transferring money etc. . ---
**Author:** ![Riemann](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/riemann/32/3133_2.png) [@Riemann](https://boards.straightdope.com/u/Riemann)\ **Post date:** [October 13, 2019, 12:39pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/10 "2019-10-13T12:39:59Z")
Current account in U.K. terminology = checking account in U.S. Nothing more to it than that, they are exact synonyms. They weren’t renamed in the U.K. because nobody writes cheques any more or anything along those lines, they were always called that. ---
**Author:** ![DPRK](https://avatars.discourse-cdn.com/v4/letter/d/4491bb/32.png) [@DPRK](https://boards.straightdope.com/u/DPRK)\ **Post date:** [October 13, 2019, 1:07pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/11 "2019-10-13T13:07:03Z")
I would expect any “current account” to be a transactional deposit account, but features may vary— you wouldn’t automatically asume you get any interest, would you? I don’t know that they are _exactly_ synonymous with “checking accounts” even in the US (though a checking account would usually be a current account), or that they always come with fees in the US. Back to the subject, [here](https://www.gov.uk/government/news/new-basic-fee-free-bank-accounts-to-help-millions-manage-their-money) we see the government asking banks to offer “basic accounts” that include certain features (like debit cards; no guaranteed interest or cheques) at no cost. But anything non-basic is still going to entail fees, plus these are big banks, with plenty of customers, who are not going to fail because a couple of people dared to deposit less than a million. It’s probably worth it to them to attract plenty of average customers to open personal current accounts, as that adds up and they make use of their services. The link above includes some recent reports. ---
**Author:** ![PatrickLondon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/patricklondon/32/4422_2.png) [@PatrickLondon](https://boards.straightdope.com/u/PatrickLondon)\ **Post date:** [October 13, 2019, 1:16pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/12 "2019-10-13T13:16:13Z")
> [@DPRK](#): > > I would expect any “current account” to be a transactional deposit account, but features may vary— you wouldn’t automatically asume you get any interest, would you. Not automatically, no, especially with interest rates being so close to zero anyway. Decades ago, I don’t recall either charges or interest on a current account that wasn’t overdrawn; to earn interest one needed a deposit/savings account. More recently, there have been times when interest has been paid on current accounts, though charges have likewise become a bit more noticeable. I’ve always assumed banks make their money by making the money deposited with them work harder, not just in making long-term loans, but overnight transactions and the like: it only needs to be pennies on any one account that add up to rather a lot when all are taken together. ---
**Author:** ![Calavera](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/calavera/32/70_2.png) [@Calavera](https://boards.straightdope.com/u/Calavera)\ **Post date:** [October 13, 2019, 1:16pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/13 "2019-10-13T13:16:41Z")
> [@DPRK](#): > > I would expect any “current account” to be a transactional deposit account, but features may vary— you wouldn’t automatically asume you get any interest, would you? I don’t know that they are _exactly_ synonymous with “checking accounts” even in the US (though a checking account would usually be a current account), or that they always come with fees in the US. > > Back to the subject, [here](https://www.gov.uk/government/news/new-basic-fee-free-bank-accounts-to-help-millions-manage-their-money) we see the government asking banks to offer “basic accounts” that include certain features (like debit cards; no guaranteed interest or cheques) at no cost. But anything non-basic is still going to entail fees, plus these are big banks, with plenty of customers, who are not going to fail because a couple of people dared to deposit less than a million. It’s probably worth it to them to attract plenty of average customers to open personal current accounts, as that adds up and they make use of their services. The link above includes some recent reports. There are no fees for the majority of current accounts in the UK, and not just for basic transactions. If you want something like free travel insurance you can generally buy a premium account, but all retail banking transactions are free in most UK current accounts, (plus interest on the first £1000 or so). ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [October 13, 2019, 1:21pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/14 "2019-10-13T13:21:50Z")
> [@septimus](#): > > I wonder if **friedo** is being sarcastic. Don’t savings (passbook) accounts come with ATM cards, direct deposit, etc. in the U.S.A.? Are checks the only advantage current accounts have over savings accounts? I only see about two checks per decade these days. Not checks, exactly. In the US there are Federal limitations on savings accounts regarding the number of transactions a month- there’s a limit of six transactions per month for certain transactions including: Online transfers from those accounts to a different account either at the same institution or a different one Transfers processed over the phone Automatic or preauthorized transfers, such as bill payments or any other recurring transfers Overdraft transfers from your savings account to your checking account. ---
**Author:** ![Eva\_Luna](https://avatars.discourse-cdn.com/v4/letter/e/e495f1/32.png) [@Eva\_Luna](https://boards.straightdope.com/u/Eva_Luna)\ **Post date:** [October 13, 2019, 2:11pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/15 "2019-10-13T14:11:38Z")
> [@Riemann](#): > > Current account in U.K. terminology = checking account in U.S. > Nothing more to it than that, they are exact synonyms. They weren’t renamed in the U.K. because nobody writes cheques any more or anything along those lines, they were always called that. Yep, as a lifelong U.S. resident, the only reason I happened to know what a current account was is that in Spanish it’s a _cuenta corriente_ (exact translation). And I used to work for a bank. ---
**Author:** ![DPRK](https://avatars.discourse-cdn.com/v4/letter/d/4491bb/32.png) [@DPRK](https://boards.straightdope.com/u/DPRK)\ **Post date:** [October 13, 2019, 2:44pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/16 "2019-10-13T14:44:07Z")
There used to be non-current checking accounts in the US like [negotiable order of withdrawal accounts](https://en.wikipedia.org/wiki/Negotiable_Order_of_Withdrawal_account), but according to Wikipedia, not any more. The difference was, banks were not allowed to offer interest on current accounts. With some limitations, you could also write checks payable on money-market accounts and similar, but that is more like the situation with savings accounts. ---
**Author:** ![mixdenny](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mixdenny/32/2962_2.png) [@mixdenny](https://boards.straightdope.com/u/mixdenny)\ **Post date:** [October 13, 2019, 3:37pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/17 "2019-10-13T15:37:57Z")
> [@Calavera](#): > > I know in the US banks generally charge for having a current account, and also charge for a lot of the services we generally get for free. US banks that I am aware of do not charge to have an account as long as you have regular deposits. I cannot think of any day to day usage that has a fee for a service. Dennis ---
**Author:** ![madsircool](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/madsircool/32/3432_2.png) [@madsircool](https://boards.straightdope.com/u/madsircool)\ **Post date:** [October 13, 2019, 4:03pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/18 "2019-10-13T16:03:56Z")
> [@Riemann](#): > > Current account in U.K. terminology = checking account in U.S. > Nothing more to it than that, they are exact synonyms. They weren’t renamed in the U.K. because nobody writes cheques any more or anything along those lines, they were always called that. Wouldnt British renters need to write check(que)s to pay their rent? ---
**Author:** ![Calavera](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/calavera/32/70_2.png) [@Calavera](https://boards.straightdope.com/u/Calavera)\ **Post date:** [October 13, 2019, 4:13pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/19 "2019-10-13T16:13:44Z")
Most people, (virtually all?) will use online/mobile banking. A few holdouts will use cash, and some few people will use a cheque, which aren’t quite dead yet, (just sleeping…). Others can pay at any convenient “PayPoint” store with cash/credit card if the landlord sets up such an account. ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [October 13, 2019, 4:46pm UTC](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712/20 "2019-10-13T16:46:16Z")
> [@mixdenny](#): > > US banks that I am aware of do not charge to have an account as long as you have regular deposits. I cannot think of any day to day usage that has a fee for a service. This seems to vary a lot depending on location; I for one have never paid a fee for a bank account or ATM usage, but you might have to at smaller regional banks if you don’t keep your balance above a certain minimum amount. I’ve heard people complain about fees for checking accounts (equivalent to current accounts, I guess) and it always amazes me that they don’t shop around for a better deal. OTOH, switching banks can be a pain in the ass. [Next page](https://boards.straightdope.com/t/how-do-banks-in-the-uk-make-money-from-current-accounts/841712.md?page=2)