As the name suggests, a basic bank account offers a place for you to store your money and pay your money out from. There is no overdraft facility or in-credit interest.
Most basic bank accounts will give you a debit card, so you can make payments in shops and online . They all allow you to set up direct debits, which is great as this can make bills cheaper than paying by cash or cheque.
From 1 January 2016, basic bank accounts will be 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. While the bank won’t charge you for unpaid direct debits, you could still get charges from the company that hasn’t been paid.
Who can open a basic bank account?
They’re particularly designed for people with poor credit scores who won’t pass the credit check for standard bank accounts. So 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) 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 ID checks (but not credit checks) with credit reference agencies 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?
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, they will be able to tell you if any other ID is acceptable.
Easiest-to-get basic bank accounts
While many banks offer these accounts, three banks seem to welcome basic bank account customers and are proactive in helping them.
The three accounts which get this thumbs-up are Barclays Cash Card, Co-op Cashminder and Virgin Money’s Essential Current Account (note that the Co-op’s account isn’t available to undischarged bankrupts).
All three banks say that as long as you have proof of address and pass the ID checks, you can get a basic bank account. 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||P||x||P|
|Accepts those in an IVA, DMP, DRO or discharged bankruptcy (1)||P||P||P|
|Those with a record of fraud||x||x||x|
(similar accounts exist for 16-17 year olds)
|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?||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 check is made to a credit reference agency)||Yes, but only to confirm identity & check whether you’re bankrupt|
|Allows direct debits and standing orders||P||P||P|
|Free access to UK ATMs||P||P||P|
|Visa debit card given||P||P||P|
|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 (can’t have online access while bankrupt)||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.|