It’s almost impossible to operate in the modern world without a bank account. Most employers will only pay your salary into a UK bank account, and most of your bills are likely paid electronically too. In recent years, you’ve probably noticed that a relatively small percentage of your daily transactions are made using cash.
So, finding the right bank account is crucial but often, we open an account when we first start earning and then stick with it. You might review the account from time to time but many of us don’t give much thought to it.
This could mean you’re making simple, avoidable errors that potentially cost you money.
Here are five common banking mistakes to watch out for.
1. Staying with the same bank
Once you’ve opened an account, you might not want to switch to a different bank. You may think loyalty pays, and you’d rather stay with a brand that you know and trust.
However, this could mean that you’re missing out on higher interest rates or better services offered by different banks. This is especially true since the recent influx of online banks competing with the established high-street names.
While many people assume that the likes of Barclays, HSBC, Lloyds, and NatWest offer the best service, that isn’t necessarily true.
In fact, according to Which?, the best bank in 2025 is First Direct, closely followed by:
- Monzo
- Starling
- Chase
If you explore some alternatives to high-street banks, you might benefit from an improved service.
You might be able to find a more favourable interest rate for your savings too.
Data from Moneyfacts shows that, on 4 June 2025, the best easy access savings account interest rate of 4.75% came from a little-known bank called Atom Bank.
Interest rates are always changing, so instead of staying with the same bank, you might benefit from checking regularly and moving your wealth to increase the growth you benefit from.
Many banks also offer a switching bonus, so you could benefit from a small cash sum when opening a new account.
2. Keeping all your accounts with the same bank
Another common mistake is keeping all your accounts with the same bank. For instance, you might already have a current account with Barclays, so decide to open an ISA with them too.
This might make life easier because you can manage all your accounts from the same online banking dashboard. You may feel comfortable because you already know the bank too.
However, as already discussed, your current bank might not offer the best interest rate on your savings.
If you hold a Stocks and Shares ISA with your bank, the fees you pay could be higher than other providers too.
That’s why you should compare options for each of your different accounts and use several providers, if necessary.
3. Leaving too much wealth in your current account
Your current account is useful for everyday spending but it’s a mistake to leave too much of your wealth in one of these accounts because you’re likely missing out on potential growth.
Despite this, Money Age reports that, in the UK, there are more than 8.3 million current accounts with at least £10,000 in them. Most of these accounts are earning little or no interest.
In specific cases, you might need to keep this amount of wealth in a current account if you’re planning to make a large purchase. However, most of the time, you don’t need large cash reserves to manage your day-to-day spending.
It’s worth checking your current account and considering whether you could move surplus funds into an easy access savings account or Cash ISA, which may pay a higher interest rate. Alternatively, you could invest a portion of this wealth instead.
4. Paying for packaged accounts
Packaged bank accounts charge a monthly fee and typically come with added benefits such as travel cover, insurance for electronics, or cashback on purchases.
While you might get good value from a packaged bank account if you use all the services regularly, this isn’t always the case.
For instance, you might already have cover for your electronics with your existing home insurance. If you’re only travelling a few times a year, you may not need year-round travel insurance.
Often, paying for these accounts is a net loss and you may want to consider whether it would be better value to purchase additional services such as insurance separately.
5. Failing to read the small print
When you’re looking for a new bank account, you might be drawn in by high interest rates or large switching bonuses. However, when you read the small print, you might find that the account isn’t as attractive as it first seems.
For instance, some savings accounts with favourable rates only allow you to deposit a certain amount each year. This could mean that you’re unable to deposit all your savings in the account and this might limit your growth.
Imagine you have £5,000 you want to save, for example. You might find an account that pays 5% interest but only allows you to deposit £2,000 a year.
If you contributed the full £2,000, you would earn £100 interest in the first year.
However, if you put the full £5,000 in an account with 4% interest and no deposit limit, you would earn £200 interest in the same period.
This is just one example of why it’s crucial that you read the small print before opening any new account, so you fully understand any charges or stipulations that could affect you.
If you can avoid these common banking mistakes, you might find it easier to manage your wealth effectively.
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We can give you guidance about the most suitable ways to hold your wealth.
Please get in touch or email us at advice@mlifa.co.uk for more information.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.