Opening a bank account

A good way to keep track of your money is to open an account with a bank, building society or post office. Different accounts give you different things, so think carefully before you open one and visit a few high street banks before you make your choice.

Depending on your age, there are several types of services that you might be offered.

Most banks and building societies offer you Cash Cards (depending on your age). A cash card allows you to withdraw money from a cash machine, 24 hours a day, 7 days a week, though some cash machines may charge you for this service. You will be given a Personal Identification Number (PIN) for your card, it is important to keep this number secret otherwise your bank may refuse to refund you if somebody steals and uses your card.

If you open a current account you may ask for a cheque book and a cheque card when you are 18, but your bank manager may agree to give you one sooner. This means you don't have to carry large amounts of money around with you because you can pay a cheque up to a limit set by the bank, usually £50 or £100. A cheque is an instruction to your bank to take money out of your account and give it to the person named on the cheque. You can also get money out of your account by cashing cheques at banks other than your own, although most banks now charge for this. If you want cash yourself, you should write a cheque payable to -?Self- and hand it to the cashier. Always keep your cheque card in a different place from your cheque book in case either is lost or stolen.

If you are over 18 and have a current account you can have a Debit Card, this acts as a paperless cheque but is not guaranteed. You can pay for goods in some shops with a debit card, you will have to sign the receipt or enter the Chip and Pin number to confirm that it is your card. If you pay for something using your debit card the money will be taken from you're account more quickly than if you paid by cheque, this could be the day after you buy the goods.

With some bank accounts you can arrange for money to be taken directly out of your account. A standing order can be agreed with the bank to pay a fixed sum automatically on a regular basis. This is very useful for making sure you pay rent or bills on time. Or you can arrange a direct debit. This is useful if you have to pay a bill regularly but the amount varies, for example a phone bill. You can agree with your bank to make regular payments from your account to cover a request from a creditor (the telephone company), this is called a direct debit mandate.

What Type of Account is Best Suited to You?

Bank accounts can be either Basic, Current or Deposit.

Basic Accounts are simple to use and do not cost anything to open. You can pay money in or take money out either directly from a bank clerk or by using a cash card - and in most banks you can set up standing orders and direct debits. You cannot go overdrawn with a basic account, which can be an advantage. However if there is not enough money in your account to pay a direct debit you have set up, you may be charged. If you want to open a basic account you need to ask for it by name at the bank.

Current Accounts are very similar to basic accounts, but with a current account you can also spend or withdraw money using a cheque book (with a cheque guarantee card) and a cash card. You may also get a debit card which you can use in shops and cash machines. The bank may also let you have an overdraft and access to other types of credit with a current account.

Deposit Accounts are useful if you are trying to save money as they should pay interest on the money in the account - but a deposit account doesn't offer the same amount of services compared to the other types of account.

Telephone/Internet banking

Telephone banking is an excellent way of banking if you do not have time to go to a branch during normal business hours as you can carry out the majority of your banking by phone (or fax!). A lot of high street banks offer this option, which is often available 24 hours a day, 365 days a year - giving you the freedom to make transactions and enquiries whenever you want. Alternatively, if you have access to a computer linked to the Internet, on-line or Internet banking gives you the opportunity to do your banking over the Net.

Buying on credit

If you're under 18, most of this section won't apply to you. Remember though, once you are old enough to take out a credit agreement think carefully before you agree to one, as debt problems are becoming more common among young people.

There are different kinds of credit available, for example:

Fixed Sum Credit Agreements: This is when you borrow a set amount of money and then agree to repay the amount plus interest at regular intervals over a fixed period of time. When all the repayments have been made the credit agreement will come to an end. Examples of fixed sum credit agreements are personal loans (perhaps from a bank) and credit sale agreements when you buy goods from a shop or business.

Hire purchase agreements: These are used to obtain (or buy) a particular item from a shop. You will pay a lump sum as a deposit and then repay the amount plus interest at regular intervals over a fixed period of time. If you fail to repay, the seller could take the goods back. The goods do not become yours until the final payment is made, so if you sell the goods before paying off all the instalments you will be guilty of theft.

Credit or Store Cards: These allow you to spend up to a certain amount and pay it off later. For a store card this is restricted to a particular store or group of stores for example Topshop or House of Fraser. You will receive a bill for it at the end of the month and you will have to pay off an agreed minimum amount. If you pay all of your bills at once, you may not have to pay interest, but if you fail to pay at the end of the month you may get charged. Credit cards and store cards are generally very expensive if you run up a debt, especially as most charge a high rate of interest and you may also be charged an annual fee. Before signing up, check the agreement carefully and try not to spend more then you can pay back.

Before you take out any form of credit, check the following:

Interest - This is an amount of money added to the original price of the goods, in return for allowing you to pay for them over a longer period of time. For example, if you buy a new bike for £100 and are charged £20 interest/year, this means that you will repay a total of £120 (£10 a month for 12 months). In adverts, this is usually described as APR (Annual Percentage Rate of charge). Comparing the APR's listed in different adverts allows you to compare one credit deal with another and pick the best one for you (the lower the better).

Always shop around for credit. Work out the total cost of the agreement to you, ie, how much will you actually pay altogether. Different agreements will add up to completely different amounts.

Remember to check with your bank or building society too. They may give you a better deal.

Before entering any kind of credit agreement:

• DO take the agreement home with you and think about it carefully. Ask another person to check the costs.
• DON'T take credit from a private money lender. Some operate illegally and charge enormous rates of interest.
• DON'T be pressurised into signing an agreement until you are sure that you want to and can afford to.

If you sign a credit agreement at home, you may cancel it within five days. Your cancellation rights from any doorstep trader should be in writing - if not, don't sign. To cancel any credit deal you must discuss it face to face with the traders and sign the forms away from the premises. If you buy on credit in a shop, however, you cannot change your mind once the contract has been signed.