There are 2 different types of bank accounts for bad credit available in the UK. Basic bank accounts are offered by most high street banks and nowadays there are also guaranteed bank accounts offered by second tier banks and finance companies for those denied access to the more mainstream basic bank accounts.
We will take a look at both types of account and examine the advantages and pitfalls of each.
Basic bank account
A basic bank account is the most simple type of account offered by UK banks and enables people with poor credit to operate a bank account within the mainstream UK banking system. They are generally not well advertised by the banks because the banks argue that they do not make much if any money for the bank. Chancellor George Osborne has been pressurising the UKs largest banks to guarantee an industry standard basic bank account so that benefit claimants can receive their benefits directly into a bank account. Whilst the government is keen for this to happen, the banks aren’t too keen on the idea!
Nevertheless accounts are available so let us take a look at the typical features of these basic accounts.
Basic bank accounts all come without an overdraft facility and without a cheque book. As for cheque guarantee cards they were abolished for all types of bank account in 2011. The good news is that the accounts enable you to receive wages, benefits and other direct payments into your account and allow you to set up standing orders and direct debits to pay household bills and subscriptions.
Basic accounts come with an ATM card so that you can draw cash out from ATM machines. Most cards double up as a debit card as well so that you can use the card to make purchases in shops, garages, restaurants etc and also for online purchases. Some debit cards have more features than others so it’s best to check with the bank what the features and limitations of the card they offer gives you.
They are generally easy to open and require 2 forms of ID-one to prove who you are such as a driving license or passport, and another form of ID to prove where you live such as a utility bill. Mobile phone bills are not usually accepted for this purpose.
Can I get a basic bank account?
The requirements really are quite straight forward. As long as you are over 16 years of age, or with some banks 18 years of age, you are most certainly entitled to apply and be offered a basic account.
There are no minimum salary requirements and no minimum amount of money required to be paid into the account each month.
Banks do not require you to have a good credit history although a basic search is usually carried out to help confirm who you are. A bank’s internal system will flag up whether you already have any other accounts with them now or in the past, and whether you owe the bank any money. This is a key issue to bear in mind if you are thinking of opening a basic bank account for bad credit because if you owe that particular bank any money they will probably decline your application.
Do I have to pay a monthly fee for a basic bank account?
Basic bank accounts in the UK are currently free of charge. It is widely reported that banks are reviewing the basis upon which they offer all current accounts and it may well be that at some future point we will all have to pay a monthly fee whatever type of current or basic bank account we have.
But I’m bankrupt, surely I can’t have any type of bank account?
This is a common misconception. The Official Receiver is happy for you to operate a bank account as long as you do not have an overdraft facility on the account.
Who do you recommend?
Everyone’s circumstances are different but at Kealey Consulting we find that the Barclays Cash Card account is both easy to open and comes with a good range of features for a bank account for bad credit. The account can be accessed and operated online too. Bankrupts are often accepted for this type of basic bank account.
Guaranteed bank accounts from second tier/sub-prime providers
Whilst nearly everyone should be able to open a non fee-paying bank account, there is a second option. Bank accounts for bad credit are available from other finance institutions and attract a monthly fee. They are even easier to open than basic accounts and are often called guaranteed bank accounts. In other words, if you apply for one you are guaranteed to be accepted so long as you are over the age of 18.
Probably the best known account is offered by Cashplus. The account operates just like a regular bank account and comes with a sort code and 8 digit account number so that you can have your wages paid into the account. A MasterCard debit card is provided with the account. Other types of guaranteed bank accounts for bad credit may be issued with a Visa debit card.
Most of these guaranteed bank accounts for bad credit accept direct debits and standing orders just like a regular current account and the MasterCard or Visa card can be used anywhere in the world that accepts those cards and for making online payments and ATM cash withdrawals. Please verify with the account provider before signing up.
The key feature of these bad credit guaranteed bank accounts is that you really are guaranteed to be accepted. No credit checks are carried out at all. Identification is usually verified electronically- you may have to provide your passport or driving licence number with your online application.
What about the monthly fee? How much is that?
Guaranteed bank accounts attract a fee in the typical range of £10 to £12.50 a month.
Which is best? A basic bank account or guaranteed bank account?
For most people a basic bank account would probably be the first choice. If you struggle to open one because of your poor credit record all is not lost because everyone who can prove their identification and is over the age of 18 will be accepted for a guaranteed bank account.