Basic Bank Accounts

There's a tragic problem in the UK with banking exclusion. Up to 1.5 million people in the UK don't have a regular bank account, and if that's you, even doing simple things like paying bills can be a nightmare.

Yet there is a solution called a 'basic bank account'. Basic bank accounts are products designed for those with poor credit scores. As the name suggests, these accounts offer a place for you to store your money and pay bills from, though they don't come with overdrafts.

Our top pick basic bank accounts will give you a debit card, so you can make payments in shops and online, and 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?

Mostly, yes. 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.

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

You should also be aware that basic accounts can still charge you for things like using your debit card abroad, and for certain types of special payments from the account like same-day CHAPS payments.

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.

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.