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Basic Bank Accounts Top accounts for poor credit scores

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More than one million people in the UK don't have access to bank accounts. Yet basic bank accounts could help them get into the banking system - it's just banks don't advertise them very well.

This is a quick guide to the best basic bank accounts, designed for people with poor credit who can't get standard bank accounts. So long as you have basic ID, you should be able to get a basic bank account with a debit card, and the ability to pay direct debits.

What is a basic bank account?

There's a tragic problem in the UK with banking exclusion. If you're one of the million people who can't get a regular bank account, it's a nightmare. Yet there is a solution called a 'basic bank account'. This product is designed for those with poor credit scores.

As the name suggests, a basic bank account just offers a place for you to store your money and pay your money from, without overdraft facilities or any in-credit interest.

Most basic bank accounts will give you a debit card, so you can make payments in shops and online, and all allow you to set up direct debits - which is great, as this can make bills cheaper than paying by cash or cheque.

Are they completely free of charges?

No - just because you don't have an overdraft doesn't mean there aren't charges. If you have direct debits going out, or try to make debit card payments when you don't have money in the account, you'll be charged an 'unpaid transaction fee' at up to £25 a time.

So it's crucial you ensure you know exactly what money you have in the account, and to manage it carefully. If you need help managing your money, the Budgeting guide has hints, tips and tricks to see where you're spending and help you cut down.

Why don't banks publicise these accounts?

Although few bank accounts in the UK charge you to use them, most accounts have overdrafts, which you pay for. These tend to make banks enough money, meaning they can offer 'free' banking to those not in their overdraft (the banks call it 'cross-subsidy').

But with basic bank accounts, unless you make a mistake and get charged, there's no chance for the bank to make money from you as a customer. Instead, it makes a loss, because of the administration costs of setting up your account, for example, producing and sending your debit card and statements.

So banks don't tell you about these accounts as they don't really want people to have them. Unless you specifically ask for them by name, bank staff may not mention the option. Instead you'll be given the normal account application forms, fail the credit check, and be rejected.

This may make you wonder "why bother having them at all?" We suspect it's just a political sop. Banks know if they didn't offer basic accounts, the they may be forced to do so - this way they can argue that legislation isn't needed as they already provide the accounts.

A simple rule change would instantly solve this situation. When you apply for a normal account, if you're rejected due to the credit check, the bank should be forced to offer you its basic account there and then.

Who are basic bank accounts for?

The current account market is extremely competitive. Some big banks throw out free £100 deals just to tempt new customers in (see Best Bank Accounts for the top deals).

Yet to get those you'll need to pass a credit check - where the bank assesses whether it wants you as a customer.rejected

If you're rejected, there are a lot of different reasons why this might be, so don't assume because one bank doesn't want you, another one won't.

But if you've a poor credit history with serious defaults, CCJs, or bankruptcy, it can be very difficult to get a standard bank account. If this is you, it's likely you'll need to open a basic bank account while you sort your credit problems out.

If you want to improve your credit rating, or find out more about why banks might reject you for an account, see the Credit Scores guide.

Who can open a basic bank account?

Bar a couple of exceptions, anyone can get a basic account.

They're particularly designed for people with poor credit scores, who won't pass the credit check for standard bank accounts. Because of this, past credit problems - such as CCJs, defaults, or having been declared bankrupt in the past year - aren't usually a barrier.

However, you don't have to have credit problems to open a basic bank account. If you want an account to help you manage your money and which won't let you go overdrawn, you can also opt for one. Be specific, or the bank might try to push you into its standard account.

The only people who can't have a basic bank account are people with criminal convictions for fraud (people with other convictions can still apply and be accepted, subject to fulfilling the other account-opening criteria).

You'll need some form of identification to open a basic bank account - if you don't have that, you might be rejected. This isn't the bank being difficult, it needs to see certain specific documents to comply with money-laundering regulations.

What ID do you need to open a basic bank account?

Proof of indentity is required for a basic bank account application

To confirm who you are, you'll usually need one (original) of the following:

  • Full, current passport

  • Current European Union member state identity card

  • Current UK photocard driving licence or UK full paper driving licence

  • Identity card issued by the Electoral Office for Northern Ireland

  • Benefit books/benefit entitlement letters; includes pension, child benefit, income support, disability and jobseeker's allowance

  • HMRC tax notification or assessment letter

If you're struggling to provide these documents, there are other forms of ID you may be able to use. The Money Advice Service has a list of what ID each of the big banks needs for you to open its basic account.

If you can't provide any of the accepted forms of ID on the list, it's best to contact the bank to explain the situation - it'll be able to tell you if any other ID is acceptable.

Easiest-to-get basic bank accounts

While many banks offer these accounts, the anecdotal feedback we have is that two banks seem to welcome basic bank account customers, and are far more proactive in helping them.

The two accounts which get this thumbs-up are Barclays Cash Card and Co-op Cashminder (the Co-op's account isn't available to undischarged bankrupts).

Both Barclays and Co-op say that as long as you have proof of address and ID, you can get a basic bank account.

Barclays adds that it automatically offers a basic account to anyone who passes address and ID checks, but who can't get a standard account because of their credit score - which is something MoneySavingExpert.com has been campaigning for.

Neither account will give an overdraft (Barclays has a £15 buffer), nor any interest if you're in credit. But you'll get a Visa debit card, and you can set up direct debits and standing orders.

Because you can't go overdrawn, you need to make sure you have enough money in the account to meet any payments, else you'll be charged an 'unpaid item' fee. If you incur multiple charges, these banks could cancel your direct debit facility, or close the account.

Barclays & Co-op basic bank account details
Accepts those with an undischarged bankruptcy
Accepts those in an IVA, DMP, DRO or discharged bankruptcy (1)
Those with a record of fraud
Minimum age

18
(similar accounts exist for 16-17 year olds)

16
ID required
Proof of address plus one piece of ID (see full list)
Proof of address plus one piece of ID (see full list)
Credit check needed?
No credit check is needed (although an identity check with a credit reference agency may be carried out)
No credit check is needed (although an identity enquiry is made to a credit reference agency)
Allows direct debits and standing orders
Free access to UK ATMs
Visa debit card given
Overdraft available
Unpaid direct debit charge
£6 (max one a day)
£15 (first one each year is free, max 10 per 3mths)
Open it
In branch
In branch (can phone for an application form)
Operate it
Phone/branch/online
Phone/branch/online
(1) When you are made bankrupt, your assets such as your possessions, home and income can be used to pay your debts. Bankruptcy usually lasts 12 months and after this time you are discharged, or freed, from your bankruptcy debts.

For details of other banks' basic accounts, see the Money Advice Service's PDF guide.

Are there alternatives to basic bank accounts?

If you can't get, or don't want, a basic bank account, then there are some other alternatives you can try. However, they're not available to all, and in many cases, they're not cheap.

Credit unions

Many credit unions across the UK now offer bank accounts, and most allow undischarged bankrupts to get them. You'll usually have to pay a small joining fee (£2-£5/yr) and/or commit to keeping a certain balance in your account to be a member.

Credit unions tend to serve local communities, so it's luck of the draw as to whether there's one near you. Check the Credit Unions guide to see if there's one local to you.

Post Office Card Account

If you're in receipt of certain Government benefits, pension or tax credits, and you don't have a bank account for them to be paid into, then you can use a Post Office Card Account.

You'll need to contact the office that pays your benefit as you can't open these accounts directly. You'll need proof of ID and address to get one of these accounts opened for you.

The Post Office Card Account is very basic - you get a card, and your benefits are paid onto that card. You can then use the card to spend or withdraw cash, until the balance runs out. There's no overdraft facility, and you can't set up direct debits to be paid from the account.

Prepaid cards

Much like the Post Office Card Account, you can load with prepaid cards with cash which you can then use for spending. You can't get wages or benefits paid onto these cards, so they're only useful if you're paid in cash.

To see if a prepaid card's the right option for you, see the Prepaid Cards guide.

Fee-paying accounts

There's a couple of bank accounts out there that don't credit check, so are open to all.

The Think Money account is a prime example - anyone can open it, but it costs £14.50 a month. On the plus side, it does help you manage your money - it separates money you need to set aside for bills into a separate account.

This way, you know that the cash available on the associated prepaid debit card is available for you to spend, and your bills are taken care of. But it's a large price to pay each month for a simple service that you can easily set up by opening an associated savings account.

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