Millions of basic bank account holders will soon be able to switch to a truly fee-free basic account, after the Government announced nine of the new accounts would be up and running in the New Year. But current basic bank account holders may not be automatically switched to a fee-free account so you should contact your provider to check.
The Treasury has officially stated that the charge-free accounts will launch from 1 January, though some people may have been able to apply for them already. They're aimed at those who don't currently have a bank account or those who have been frozen out of normal banking because of previous money problems.
Basic bank accounts which don't offer arranged overdraft facilities or any in-credit interest already exist for people with poor credit who can't get standard bank accounts. The Treasury estimates there are nine million basic account holders in the UK. See MoneySavingExpert.com's Basic Bank Accounts guide for more information.
But at the moment most basic bank accounts charge an 'unpaid transaction fee' if you have direct debits or standing orders going out or try to make debit card payments when you don't have money in the account.
In some cases, banks have charged up to £35 per failed item, and these charges have been uncapped, meaning charges can rollover and build up, pushing holders into unauthorised overdrafts. In other cases, customers have found it difficult to get a debit card and some banks have also previously sought to limit access to the ATM network.
With the new fee-free basic bank accounts, customers will be offered services on the same terms as other personal current accounts, including access to standard over-the-counter services at bank branches and at the Post Office, as well as access to the entire ATM network.
The new basic bank accounts were first announced in December 2014 after an agreement between the Government and the banking industry.
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Which banks are taking part?
Nine banking groups have agreed to offer fee-free basic bank accounts:
- Barclays Barclays Basic Current Account
- The Co-operative Bank Cashminder
- HSBC Basic Bank Account
- Lloyds Banking Group (Bank of Scotland, Halifax and Lloyds) Basic Account
- National Australia Bank Group (including Clydesdale Bank and Yorkshire Bank) Readycash Account
- Nationwide FlexBasic
- RBS Group (NatWest, Royal Bank of Scotland and Ulster Bank) Foundation Account and Basic Account (England and Wales)
- Santander Basic Current Account
- TSB Cash Account
Nationwide told us it's already offering its fee-free account, which launched on 1 December.
How do the fee-free accounts work?
The new accounts allow customers to do the following:
- Have wages, benefits, state pension or tax credits paid directly into their accounts.
- Pay in cheques for free.
- Take money out at LINK ATMs.
- Withdraw money at Post Office branches.
- Pay bills by direct debit and make card payments, including online.
- An unarranged overdraft won't be available.
Will existing basic bank account holders no longer be charged fees?
The Treasury says if you already hold a basic bank account, you should contact your bank or building society to see whether you'll still be charged if a direct debit or standing order fails.
You may need to apply for a new account, either with your existing bank or building society or with a new provider.
'A key step forward in ensuring our banking industry works for everyone'
Economic secretary Harriett Baldwin says: "Making sure that everyone in Britain has access to basic banking and financial services is at the heart of our long-term plan.
"That's why I'm delighted that for the first time, truly fee-free basic bank accounts will be available to anyone who doesn't already have an account, or isn't able to use their existing account due to financial difficulty.
"This is a key step forward in ensuring our banking industry works for everyone."