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Basic Bank Accounts

Top accounts for poor credit scores

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Wendy and Helen S

Updated August 2016

More than one million people in the UK don't have a bank account. 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 guide to the best basic bank accounts for people with poor credit who can't get (or don't want) standard bank accounts. So long as you have basic ID, you should be able to get one 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 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?

Yes. Since 1 January 2016, basic bank accounts have been free of all charges for the first time. However, it's still wise to know exactly what money you have in the account, and to manage it carefully as while the bank account won't charge you for unpaid direct debits, for example, you could still get charges from the company that hasn't been paid.

Ten banking groups offer these fee-free accounts: Barclays, the Co-operative Bank, HSBC, Lloyds Banking Group (Bank of Scotland, Halifax and Lloyds), Clydesdale Bank and Yorkshire Bank, Nationwide, RBS Group (NatWest, Royal Bank of Scotland and Ulster Bank), Santander, TSB and Virgin Money.

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 a 'cross-subsidy').

But with basic bank accounts 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, and 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, then 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).

But 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. Don't worry, you're not alone - an estimated nine million people in the UK have a basic bank account.

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?

Basic bank accounts are 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. However, we've reports of some banks rejecting people because they qualify for standard accounts, so it may be best to ask before applying if your chosen bank does this.

The only people who categorically 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) or people who fail the bank's ID checks.

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.

Most banks will also do credit checks with credit reference agencies, though this is usually to check you are who you say you are - so don't worry if you see a search on your credit file from the bank.

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.

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 three banks seem to welcome basic bank account customers, and are far more proactive in helping them (see above for full list of banks offering them).

The three accounts which get this thumbs-up are Barclays Basic Account, Co-op Cashminder and Virgin Money's Essential Current Account (note that the Co-op's account isn't available to undischarged bankrupts).

Co-op and Virgin Money say that as long as you have proof of address and pass ID checks, you can get a basic bank account.

The Barclays Basic Account is specifically aimed at people who are financially vulnerable, and 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.

It has eligibility criteria, so if you'd be eligible for a standard current account with Barclays you may not be able to get the basic one.

None of the accounts will give an overdraft (Barclays has a £15 buffer). 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. There's no fee from the banks for this, though you may face late fees or arrears charges from the company or organisation you were trying to pay.

However, if you try to make these payments too often without funds, there's a possibility these banks could cancel your direct debit facility, or close the account. We've heard of it happening, though we don't think it's common - and the bank should write to you before it does this.

Barclays, Co-op & Virgin Money basic bank account details
Barclays Basic Current Account Co-op Cashminder Virgin Essential Current Account
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
18
ID required
Proof of address plus one piece of ID
Proof of address plus one piece of ID
Proof of address plus one piece of ID
Credit check needed?
Yes, to confirm identity & check if you're eligible for a standard account
Yes, but only to confirm identity & check whether you're bankrupt
Yes, but only to confirm identity & check whether you're bankrupt
Allows direct debits and standing orders
Free access to UK ATMs
Visa debit card given
Overdraft available
In credit interest
Nil
Nil
1% AER
Unpaid direct debit charge
Nil
Nil
Nil
Open it
In branch
In branch/by post
In branch
Operate it
Phone/branch/online
Phone/branch/online
Phone/branch/online or at the Post Office
(1) When you are made bankrupt, your assets (your possessions, home, income etc) 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.

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

A few credit unions across the UK now offer bank accounts, and most of these 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 withdraw cash, until the balance runs out. There's no overdraft facility, and you can't spend on the card or set up direct debits to be paid from the account.

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 £17.50 a month (£24.50 for a joint account). 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 in your non-bills account 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 yourself.

Think Money holds your cash in a dedicated trust account for you while it's on their card; this account's held with Royal Bank of Scotland and is entirely ringfenced from Think Money's operating cashflow.