Current account Guides

Basic bank accounts

Updated: Tuesday 17 January, 2012

By Martin Fagan

Basic bank accounts are simple current accounts designed for those with a bad credit rating – we explore the pros and cons.

According to statistics from Credit Action (www.creditaction.org.uk), the total personal debt in the UK in December 2011 stood at a whopping £1,451 billion, with one person being declared bankrupt or insolvent every 4.35 minutes.

Being in debt can be a nightmare; but even if you make it through to the other side, a bad credit history can haunt your past. Your credit rating can prevent you from being accepted for almost every financial product in the future, even a bank’s standard current account, because the credit check is a standard way to assess customer suitability.

If you have a poor credit history and have been refused a standard current account following a credit check, but you want to get both your finances and credit rating back on track, then a basic bank account could be for you.

Check your credit report online

• What are basic bank accounts?
• Who are Basic Bank Accounts for?
• Advantages of Basic Bank Accounts
• Disadvantages of Basic Bank Accounts
• Where can I get a basic bank account?
• What's available?
• Some final points...

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What are basic bank accounts?

Basic bank accounts are simple, no-frills current accounts that are designed for managing day-to-day money. They offer fewer features than a standard current account and don’t allow overdrafts.

All basic bank accounts provide you with a cash machine card (which will allow you to withdraw cash from ATMs) and some may provide you with a debit card (either Solo, Electron or Maestro) with which you can pay for items, or a single card that can access both services.

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Who are Basic Bank Accounts for?

Basic bank accounts are available to almost everybody. They are often favoured by people with a poor credit history who have been unable to open a standard current account due to the results of their credit check. The bank or building society may want to check your credit history when you apply for a basic bank account.

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Advantages of Basic Bank Accounts

• You can arrange for income such as salary, pension or benefits to be paid straight into your account.
• Most basic bank accounts allow you to arrange standing orders, direct debits and one-off transfers to pay bills and make other payments straight from your account.
• If you get a basic bank account that provides you with a debit card you will be able to use this to pay for goods and services, for shopping online and for getting cashback.
• You can have instant access to your cash over the counter at your bank or at the Post Office or using your cash machine card.
• Many banks and building societies will allow you to manage your basic bank account online.
• You can’t go overdrawn because you won’t get an overdraft limit – so there’s no risk of adding to any debts you may have.

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Disadvantages of Basic Bank Accounts

• You can’t go overdrawn with a basic bank account because you won’t get an overdraft limit - you will have no emergency “crash mat” fund.
• If a direct debit payment is due to be made and there isn’t enough money in your account then the bank will not make the payment. You may be charged a fee, the bank may cancel your direct debit or they might even close your account.
• With bad credit, you won't earn interest on credit balances.
• You won’t receive a chequebook or cheque guarantee card with a basic bank account.

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Where can I get a basic bank account?

The following table shows a selection of the basic bank accounts available on the high street. All of these accounts accept Automated Credit Transfer (ACT) payments, provide a cash machine card and allow withdrawals at the Post Office. None of them requires a minimum amount to open an account except Nationwide, which requires £1.

Provider	Package name	Debit card	Free buffer zone	Charge for unpaid direct debit
Halifax / Bank of Scotland	Easycash		£10	£10 (max. £30 per day)
Lloyds TSB	Cash Account		£10	£10 (max. £30 per day)
Co-operative Bank	Cashminder			£15*
HSBC	Basic Bank Account		£10	No*
Natwest	Step Account***		£6	£6**
Royal Bank of Scotland	Basic Account***		£6	£6**
Yorkshire Bank	Readycash			£35
Barclays	Cash Card Account			£8
Alliance and Leicester/Santander	Basic Cash Account			£25
Nationwide	Flex Cash Card			£15

Source: Money Advice Service. Table correct as of 6 January 2012.

*The account may be closed if a direct debit is refused three times.
**Subject to a maximum of £60 in any charging period. The bank may cancel direct debits if you don’t have enough to pay them on more than one occasion.
*** Account holders can only use ATMs of the bank the account is with.

Is there a basic bank account with no credit check?

If you are not accepted for these high street basic bank accounts due to the severity of your credit history, then you may want to consider the Card One Banking Account. You can open an account with Card One Banking without any credit checks at all and they claim that they “won’t turn you away due to any aspect of your previous financial history”. This account can be managed online, by text or over the phone and will cost you £12.50 per month plus a one-off opening fee of £30.

This may seem pricey, but if you have exhausted all other options, it could be worth it. You will get your own bank account manager who will help you manage your money and who will set aside the money needed for all your regular outgoings including bills, payments and standing orders. Any money left from your salary can then be transferred onto a prepaid MasterCard which you can use for everyday spending in shops and online.

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What's available?

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Some final points...

Basic bank accounts may be your only option if you have a poor credit history, and although they have limitations, there are still many benefits to these accounts. Furthermore, if you use your account properly and prove your reliability to your bank, you may be able to upgrade to a standard current account at a later date.

• If you want to open a basic bank account, then Halifax, Bank of Scotland and Lloyds TSB could be good places to start. All three offer accounts which provide you with a debit card and a £10 free buffer zone and have relatively low charges for unpaid direct debits.
• If you find it much easier to overspend when you pay by card, because it doesn’t feel like “real money” then you may be better choosing a basic bank account that doesn’t come with a debit card, for example the Basic Cash Account from Santander. Having to withdraw and then hand over hard cash may make you think more carefully about which purchases are really essential.
• If you are consistently denied an account with high street banks, you can apply online for a Card One Banking Account ( https://www.cardonebanking.com/). Although it may seem costly, there are no credit checks which make it a useful last resort.

Top Tip - If possible, pay your income straight into your basic bank account. This will greatly improve your chances if you ask the bank for an upgrade at a later date.

Top Tip - If you have a bad credit history or are struggling with debts you can get help and advice from organisations like the Consumer Credit Counselling Service (www.cccs.co.uk), National Debtline (www.nationaldebtline.co.uk) and Citizens Advice Bureau (www.citizensadvice.org.uk).

The Money Advice Service is a new and independent organisation funded by the government. It has a very detailed guide to basic bank accounts. Download the guide here.

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