Bank Account

A bank account is a record kept by a bank or similar institution of the money it holds for, or lends to, a customer. It lets the holder store money safely, receive payments such as wages, pay bills and spend by card, cheque or transfer. Each account has a number that identifies it, and every payment in or out is recorded as a transaction that changes its balance.

"Bank account" is the everyday umbrella term. It covers the current account (called a checking account in the US), the savings account, the deposit account and term deposits, as well as business and joint accounts. In accounting, an account is any ledger record; a bank account is the specific relationship between a customer and a licensed deposit-taker.

A bank account is like a numbered locker at a very large, very careful cloakroom, except that the attendant does not keep your exact coat. When you hand over cash, the bank writes down how much it owes you, uses the money in its business, and promises to give the same amount back whenever you ask, or at the agreed time.

The number on the locker matters most. With it, other people can send money to you and you can tell the bank to send money to them, without anyone carrying notes around. The bank keeps a running list of everything that goes in and out, which you see as your statement or in your banking app.

• Current or checking account. The everyday account for salary, card spending, direct debits and transfers. It may come with an overdraft, and usually pays little or no interest.
• Savings and deposit accounts. Accounts for keeping money aside and earning interest, from instant-access to fixed deposits locked for a set term.
• Business accounts. Accounts in a company's name, with different fees and checks; with checks on the company and its owners.
• Joint and trust accounts. Accounts held by two or more people, or by a trustee for someone else, such as a trust account.
• Islamic accounts. Accounts run under Islamic banking rules, where current accounts are held as safe-keeping or interest-free loans and savings earn a share of profit rather than interest.

Banks must check who their customers are before opening an account. These Know Your Customer (KYC) checks are part of customer due diligence under anti-money-laundering law. A typical personal application asks for:

• Proof of identity, such as a passport, national identity card or driving licence. In Pakistan the computerised national identity card issued by NADRA plays this role, often with biometric verification.
• Proof of address, such as a utility bill or tenancy agreement, where required.
• Information on the purpose of the account, expected activity and source of funds.

Many banks now verify identity online with a photo of the document and a selfie. Banks can refuse or close accounts, but some countries guarantee access to a basic account: in the European Union the Payment Accounts Directive (2014/92/EU) gives consumers a right to a basic payment account, and the UK's Payment Accounts Regulations 2015 require designated large banks to offer basic bank accounts. The World Bank's Global Findex 2025 found that about 79% of adults worldwide had an account in 2024, counting bank and mobile money accounts, up from 74% in 2021; see financial inclusion.

An account number identifies the account inside its bank; a routing code tells the payment system which bank to go to. The format varies by country:

• United Kingdom. A six-digit sort code for the bank and branch, plus an eight-digit account number.
• United States. A nine-digit ABA routing number plus the account number.
• Europe, Pakistan and many other countries. An International Bank Account Number (IBAN), which wraps the country code, check digits, bank code and account number into one string. Pakistani IBANs start with "PK" and have 24 characters.
• International transfers. A Bank Identifier Code (BIC), also called a SWIFT code, names the bank on cross-border payments.

Money goes into an account by cash deposit, cheque, transfer or direct deposit of wages, and leaves it by withdrawal, card payment, standing order or direct debit. The bank sends a regular bank account statement and may levy bank charges for some services. Balances at regulated banks are usually covered by deposit insurance up to a limit.

Accounts are also a target for misuse. Criminals recruit people to pass stolen money through their accounts, creating a mule account, and fraudsters try to take over accounts through stolen passwords. Banks monitor activity for both and may freeze an account while they investigate.

• World Bank: The Global Findex Database
• The Payment Accounts Regulations 2015 (legislation.gov.uk)