Basic bank accounts
Banks can chose who their customers are, but basic bank accounts make sure that everyone has somewhere to put their money.
Not everyone can get a regular high street bank account. If you've got a poor credit rating or a low income, banks may be reluctant to allow you to open a standard current or savings account. You can also have problems if you already have a current account that is overdrawn.
However, basic bank accounts allow you to have somewhere to deposit your money, even if your bank doesn't want to open you a regular account. Banks that are subscribed to the Banking Code should offer you a basic bank account if they think that is the most suitable account for you.
You could be refused a basic bank account if you have more than £500 of bad debts, or an outstanding court judgement against you. Your application may also be declined if you are an undischarged bankrupt, or you have a history of fraud.
What is a basic bank account
Basic bank accounts generally have the following features:
- There are no setup or fees associated with the bank
- You can set the account up without putting any money into it
- Your wages, salary, benefits and tax credits can be paid direct into it
- You can also pay cheques and cash into the account
- Bills can be paid via direct debit from the account
- You can use cash machines to take money out of the account.
However, unlike a regular current account you won't be given a cheque book. You also won't be able to go overdrawn, and you could be charged if you set up a direct debt and then don't have enough money to pay for it.
What you need to think about
Before you open a basic bank account, you should make the same checks as choosing a regular bank account.
- You should find out how many cash machines you'll be able to take money out without being charged. Different banks have different policies about charging for using other banks cash machines.
- Some basic bank accounts can accessed at the Post Office, although not all of them can so it's worth checking if you want this feature.
- How easy is it to get to a branch of your bank during the day? Is there a bank near where you live or work? This is especially important if you are charged for using other cash machines, or can't get money from a Post Office.
- If you open a basic bank account with a bank that you already have an account with, and that account is or goes into debt, your bank can take money from your basic account to pay off those debts. For that reason it's often worth opening your basic bank account with a different bank.
- Some basic bank accounts offer standing orders and a debit card.
You can compare the different basic bank accounts on the FSA website (PDF).
Thanks to CAB for help with this article.
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