MILLIONS of Brits don’t think twice about using their bank accounts and the benefits that come with them everyday.
But what would you do if you got rejected from opening a standard current account? Here is how to find the best basic bank account and why you may need one.
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Up to 1.5million Brits don’t have one – and this is where basic accounts come in.
They’re designed for people who don’t qualify for a bank’s current standard account – for example, they’ve got poor credit history and have experience of serious money problems.
So if you’re struggling to open a standard bank account, we explain what you need to know.
What is a basic bank account?
A basic bank account is for people who have experienced serious financial difficulty and don’t qualify for a standard current account.
This could be due to county court judgements, bankruptcies or if you haven’t built up enough credit history.
It acts like most standard accounts so you can pay in and take out money and set up direct debits to cover your bills.
Most importantly, you can use it to receive your wages and benefits.
Many providers will give you a debit card to use too – but with one major difference.
Because they’re designed for customers who have experienced serious money trouble before, most of them don’t offer an overdraft facility.
This makes it important to check your balance regularly, especially if you set up regular payments as you could be charged extra if you miss a payment such as to a loan provider.
All the major banks are required to offer basic bank accounts by law – and some will let you open a joint account if your partner also qualifies.
How much does a basic bank account cost?
The accounts are completely free of charge but you don’t get the benefits that some paid-for current accounts offer such as an overdraft, cashback or interest on balances.
There may still be fees for using your card abroad or foreign currency charges though so check with your provider.
Can anyone get a basic bank account?
Anyone can open a basic bank account.
It is suitable for those with poor or no credit history or even someone who has just moved to the UK and most of their financial track record is from abroad.
You don’t even need to have problems with money to open an account though – if you think it’ll help you budget each month and you don’t want an overdraft, a basic account could work for you.
What do you need to open a basic bank account?
Although basic bank accounts offer fewer options than a normal standard account, the bank or building society still needs to check who you are.
You’ll usually need to be at least 16 to open one, although for some accounts the minimum age might be 18 and you’ll have to give proof of identity and address too.
This will usually be something like your passport or driving licence – documents and letters regarding any benefits you receive might also work – but it’s best to check with the bank directly.
Most banks will also do a credit check, although this is usually just to make sure you are who you say you are.
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Who offers a fee-free basic bank account?
Any bank or building society can offer a fee-free basic bank account, but since 2016, the UK’s nine largest current account providers have by law had to offer them in bid to encourage financial inclusion.
We’ve listed the major banks’ basic accounts:
Can I open a bank account online?
The process for applying to open a basic bank account will differ depending on the provider.
You may be able to apply for basic bank accounts online or it could only be possible by visiting your local branch.
Some providers may ask you to apply for their standard current account first and then they will offer you their basic product if it is more suitable.
A comparison website can help you find the best basic bank account for bad credit and then visit the provider’s website to check their application process.
How do I setup a direct debit or standing order?
You can pay bills or make payments using direct debits or standing orders with a basic bank account.
A direct debit is setup directly with an organisation such as your energy supplier to make regular payments.
It gives a company permission to take money from your bank account.
You will just need to provide your account number and sort code and the company and bank sorts the rest.
In contrast, a standing order is setup with your bank to make regular payments if you are moving money to a savings account or paying rent to your landlord.
Your direct debits and standing orders can usually be managed directly with your bank and you will be able to do this in branch, on the phone or online depending on what your provider offers.
Basic bank accounts won’t charge you for missed payments but there is no overdraft so if you don’t have enough money in your account then a direct debit or standing order may be rejected.
A company could still charge you for a missed payment though and falling into arrears will also affect your credit score.
Is internet and mobile banking safe?
Internet and mobile banking is a more convenient way to manage your money and is generally safe as long as you keep your details secure.
Banks and building societies have plenty of processes to keep their websites and apps secure or they could get in trouble with the Financial Conduct Authority.
Their websites are encrypted so only you can view your account page and they are programmed to time out after a period of inactivity.
They will have strict login processes that may require a card reader or sending a code to your mobile phone.
There are steps you can take such as setting up a login and password that cannot be easily guessed and only logging into your account from a secure and private wi-fi connection.
Also, check who you are transferring money to and ensure they are legitimate.
The rise of online banking has also encouraged scammers to try to dupe account holders with emails and text messages.
Always check details with your bank separately.
The main providers also offer a service that verifies the details of someone you are transferring money to, which gives you an extra layer of security and ensures that person or company is genuine.
How to choose a basic bank account?
Choosing the best basic bank account is the same as opening any financial product.
You can search for accounts using a comparison website or directly with a bank or building society.
The Treasury has set rules for standard features a basic bank account must have so there must not be any fees.
But providers may offer extra features such as a contactless debit card, online banking, apps or spending alerts.
Some may even have a buffer zone that lets you withdraw a small amount, such as £10, even when your balance is low.
Check the extras that are on offer to see if you would benefit and also see if the account you want can be opened online or if you are able to get to a branch to apply.
Can I switch basic bank accounts using the 7-day switching process?
Most bank account providers are signed up to the Current Account Switch Guarantee.
Under this schemes, all your payments in and out such as your salary, benefits and direct debits are automatically transferred to your new account for you.
This means all you have to do is choose a new account and your existing payments will be moved automatically.
Switches should complete in seven working days and this also applies to moving between basic bank accounts.
Can you be refused a basic bank account?
Most banks have to offer a basic bank account but they can still refuse an application.
You may be rejected if you are unable to prove your identity or address, if you refuse a credit check or if a bank suspects fraudulent activity.
Another reason for rejection may just be because a provider thinks a standard current account would be more suitable.
The bank must give a reason for the rejection and you can appeal to them and take your case to the Financial Ombudsman Service if you are not satisfied.
How to upgrade a basic bank account
You don’t have to have a basic bank account forever and once your credit score and financial situation is improved, it may be possible to move to a traditional bank account.
This can be beneficial as you can get extra perks such as an overdraft or interest on balances.
Your account provider may periodically review this or it may have an eligibility checker that you can complete online to see if you qualify for an account with an overdraft.
A review will do a soft search of your latest credit report and assess your income and savings and investments to see if you are eligible to upgrade your account.
What are some of the alternatives to basic bank accounts?
You should be able to find one of the major banks and building societies willing to offer you an account but if you are struggling to get accepted, you might want to consider other options.
Some Credit Unions now offer bank accounts, though you’ll usually have to pay a fee of up to £1.50 a week.
It may also be worth opening an account with a mobile-only bank or fintech that may only do soft credit checks for users.
You will need to check the level of protection though as not all fintech accounts have banking licences.
They are instead known as e-money providers and are regulated differently so may not offer Financial Services Compensation Scheme protection that ringfences up to £85,000 of your money if a provider goes bust.
