When you are putting your hard earned cash into a bank account, you need to know that you are going to get the best deal you can. For that reason you need to very carefully compare bank accounts and compare savings accounts on offer. Basically, there are two kinds of bank accounts for managing money on an everyday basis: a basic account and a current account. There is also a savings account for managing money on a long-term basis.

If you are worried that you may not be able to effectively control your spending, then when you compare bank accounts, a basic bank account may be the best choice for you. A basic account will still let you draw money for your personal use, and pay any bills that may arise. However, with a basic account you will be unable to spend more money than is in your account. In other words, you will be unable to put yourself in debt.

Many people like the restriction of the basic account. It imposes a discipline on them that, for whatever reason, they feel unable to impose on themselves. With a basic bank account you will get a cash card. This card can be used to withdraw money up to an agreed limit from any bank cash machine.

Some basic bank accounts will also offer a debit card. This will allow you to also pay for items without having to use cash, and in some cases you can also use a debit card online. But like the cash card, the debit card won’t put you in debt. Bear in mind also that with a basic bank account you will not receive a chequebook, and you will not get an overdraft facility, even if you ask for one.

The other type of bank account that lets you manage day to day thing, such as drawing money or paying bills, is the current account. With a current account you need to be more watchful of what you are doing as it is possible to overspend. A current account requires more disciplined money management.

However, this is the most popular type of bank account with millions of people worldwide operating one quite successfully. They may overspend occasionally, but they have confidence in themselves that they can manage their money sufficiently well and not encounter any long-term difficulties.

With a current account at a bank you will get a cheque book. You will also get a debit card and a bank guarantee card, which will make your presented cheques acceptable. You will also be able to set up direct debits and standing orders, and you will be able to use the BACS (Bankers’ automated clearing service) system to accept money from other sources, such as wages from an employer. In addition to all this, you will be able to set up a bank overdraft, with the bank’s prior approval, of course.

The other type of bank account is the savings account. As its name suggests, this is an account that is used to invest savings. A wide range of savings accounts is available from most banks. When you compare savings accounts you should keep in mind the many different types including, but of course, not limited to:

• Internet savings accounts – these can often offer better interest rates as they have lower administration and set up costs, which means that what they save in overheads can be passed on to you.

• Instant access savings accounts – these have some of the benefits of a current account, allowing instant access to your account with being penalized for it.

• Notice savings accounts – with this kind of account you need to give an agreed period of notice in order to withdraw money.

• Fixed rate savings bonds – these offer a guaranteed fixed rate of interest for the time period that your money is invested.

• ISA accounts – these allow a limited investment each year with tax-free interest, and they come in two types, mini and maxi.

• TESSA only ISA accounts – this is a Tax Exempt Special Savings Account, meaning that the interest is tax free, but the investment has to be for five years.

• Child savings accounts – special savings accounts for children, which are often separated as children under 12 and children between 13 and 17.

All bank accounts will accrue interest. In fact, it’s difficult to compare bank accounts, or compare savings accounts without taking interest rates into the equation. The amount of interest gained will depend on the rate offered and the amount invested. Generally speaking, a savings account will accrue more interest than either a basic account or a current account.

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In order to provide you with financial security, it’s important to have some form of bank savings. Whether you can afford to set aside just a few pounds a month or a few hundred, it’s smart to start saving as early as possible. Having savings can also be a great way to deal with any financial emergencies that crop up or to buy items you can’t normally afford.

There are countless deals in the marketplace all offering people the chance to maximise their savings. However, in order to choose the right one, it’s worthwhile considering the interest rate and the type of savings account that’s right for your needs. Indeed, while a high rate of interest is desirable, you must also think about why you want to save and what sort of monetary access you need.

For example, if you know that you generally don’t have a lot of cash left after your monthly outgoings, and can therefore only afford to save a small amount, then an easy access account is probably the most effective one for your needs. In addition to having no set limits on how much and when you save, you can also gain quick access to your money.

A notice account is similar to an easy access account in that you can pay money in at any time. Before you can make a withdrawal though, you must give your bank a certain amount of notice. The benefit of doing this is that you should receive a higher interest rate.

If you know that you can put your savings away for a certain amount of time without requiring access to them, then a fixed rate account can be advantageous. In fact, offering up a set amount of interest for an agreed time period – this can range from between three months to five years – you could see some significant returns on your savings.

For those who are good with their cash and know that they always have a certain amount of money available to save each month, a regular savings account could be just the ticket. Rewarding savers with a high rate of interest, this type of account demands that you deposit a set sum of money each month into it: this can vary from between £20 and £250.

Offering up a way to earn tax-free interest on your bank savings, a cash ISA is an ideal savings account for many people. Coming in the form of either easy access or notice accounts, those under 50 years of age can to pay up to £3,600 into a cash ISA account, whilst those aged 50 or over can save a maximum of £5,100 each tax year.

The importance of having bank savings cannot be underestimated. Regardless of how much you can put aside, they’re essential for providing you with a financial cushion. Just be aware of what’s available and look for an account that fits in with your saving habits.

Official figures have shown that the UK inflation rate rose to 3.5% last month, marking the fastest annual rise in 14 months – up from 2.9% in December.

Consumer Prices Index (CPI) inflation was driven up by a combination of the VAT rate reverting back to 17.5%, together with increasing fuel prices.

Retail Prices Index (RPI) inflation which takes housing costs into consideration, increased to 3.7% in January, up from 2.4%.

A letter of explanation from the Bank of England governor Mervyn King was sent to the chancellor – a practice that is required in the event of inflation rising more than one percentage point higher or lower than the government’s 2% target.

The governor’s letter highlighted that the rise in inflation was “temporary”.

Mr Darling’s response noted that the inflation outlook was “subject to some uncertainty” as the world begins to emerge from the “deepest downturn in modern times”.

CPI inflation is the measure targeted by the Bank of England’s rate setters, and the RPI rate tends to be used as a benchmark in wage negotiations.

According to the Office for National Statistics , the rise in VAT was the most significant factor that helped push the CPI to 3.5%.

The government had cut VAT to 15% for 13 months in an attempt to stimulate the economy and boost consumer spending.

The Bank of England had anticipated inflation rising to 3.5% in 2010, but it has already made predictions that it will fall back below the target of 2% later this year.

Most economists believe the Bank will continue to keep interest rates down in order to lower inflation faster.

The Bank of England base rate has been at the record low of 0.5% for 11 months in a row.

The combination of both an increase prices and reduction in rates is punishing savers, as the value of their funds is being eroded while the interest they earn is declining.

A basic rate taxpayer is taxed 20% income tax on any returns they earn from a standard savings account and 40% for higher-rate taxpayers, so couple this with the rate at which the value of their savings are falling (based on inflation), and you can quickly see that a high interest savings account is required simply to ensure you’re money is safe.

Low savings rates combined with spiralling inflation means a number of bank accounts are now effectively worthless.

This is why it’s imperative that savers shop around for the highest interest on savings to maximise returns.

The same applies to anyone that regularly has money in a current account, as rates tend to be low on these accounts but it doesn’t have to be, and you can actually qualify for high rates on lower amounts, for example the Santander Current Account offers 6% on balances of up to £2,500, so this account would be ideal for anyone that has their salary paid into an account while using direct debits and standing orders to pay bills etc.

There are several different types of savings accounts, each holding their own advantages and designed to suit different savers. The Individual Savings Account (Isa) should be your first port of call, as they provide all individuals with an annual tax-free allowance which can be deposited each year without having to pay tax on the interest earned. There are a number of rules around Isas, so for more on this see Which4U’s Isa Accounts page.

Some of the highest rates offered can be taken advantage of by those that are willing to lock their money away for at least a year in a fixed rate savings bond.

Santander, for example, is paying 3% on its one-year fixed rate bond, while the rates rise as the term increases, with an ICICI fixed rate bond you could earn 4.25% on a two-year term and up to 4.70% for three years.

Always keep a close eye on the rates that you’re accounts are at, as in some cases they can change, especially when an introductory rate comes to an end without you being aware. If they do fall below the going rate and you are able to switch accounts, don’t be afraid of shopping around.