Basic bank accounts - who are they for and which ones are best?
For those without a bank account in the UK, a basic bank account could be a feasible way for you to get started. However, banks don’t always display the fact that such services exist. As such, many people don’t even know that there’s such a thing, let alone what they are, how they work, and who they’re for. However, if you have a poor credit history (check your credit) and can’t access a standard service, it could be the right choice for you.
We outline everything you need to know about basic bank accounts and highlight some of the best services out there.
What is a Basic Bank Account?
Essentially, a basic bank account is mainly designed for people who have poor credit scores. It offers all of the essential features you need in order to join the banking system. You can deposit and withdraw your cash, set up direct debits, get paid into the account, and have a debit card.
…if a direct debit payment fails due to insufficient funds, the bank won’t charge you.
However, you won’t get access to other features such as overdrafts and loans. On the plus side, you won’t get charged for bounced payments by the bank. So, if a direct debit payment fails due to insufficient funds, the bank won’t charge you. The company that hasn’t been paid may still, however. Additionally, you might still incur fees for using your card abroad or making special types of payments.
There are ten UK banking groups that provide such basic bank accounts. Although they don’t particularly shout about them, RBS Group, HSBC, Barclays, Lloyds, and more all offer these services.
Is a Basic Bank Account Right for Me?
Usually, when you open a new bank account, you’ll have to pass a credit check. Many high-street banks try and entice customers in with cash giveaways or free items when you sign up, but there are some people who aren’t eligible due to their poor credit score. If this is the case, then you may want to consider a basic bank account.
…basic bank accounts can act as a means to improve your credit score over time.
There are some factors that can make it difficult to get a standard bank account. For example, if your credit history features bankruptcy, serious defaults, or county court judgements. But don’t worry if this is the case, basic bank accounts can act as a means to improve your credit score over time. There are around eight million basic bank accounts in the UK right now, showing that many people rely on them.
Of course, even if you don’t have a poor credit rating, you may still wish to choose one. If you don’t want to be tempted by an overdraft, they can be useful. Just bear in mind that some banks offer these accounts only to those who fail credit checks.
Why Haven’t I Heard of Them Before?
Banks generally tend to make money on bank accounts by charging for overdraft services. Even if you don’t use the overdraft on your current account, there are plenty of people who do, meaning the bank still makes an overall profit. However, with basic bank accounts, no such service exists, meaning banks don’t make any profit off these accounts. Instead, they make an overall loss, as there are admin fees to deal with when setting up the account.
Banks will therefore only offer you a basic bank account if you ask for one by name. They don’t want to advertise the fact that they have a ‘free’ service.
Banks will therefore only offer you a basic bank account if you ask for one by name. They don’t want to advertise the fact that they have a ‘free’ service. So, even if you apply for a standard account and get rejected based on the credit check, they will likely not offer you a basic account instead, unless you ask for it.
How Do I Choose the Right One For Me?
The account that’s best for you will depend on your circumstances and what you want to get out of it. Usually, people will look at whether the bank will accept them if they have been declared bankrupt in the past or have some form of CCJ.
You need to consider whether the bank you’re applying to offers a debit card, or simply a cash card. Most people prefer to have debit cards, but it’s not necessary for everyone. Similarly, it’s worth noting that only some banks offer interest on credit balances. Additionally, if you’re intending on making a lot of deposits in-branch, you should make sure there’s one that’s close by.
You need to consider whether the bank you’re applying to offers a debit card, or simply a cash card.
Consider your options and the services that each bank offers, and make a decision that’s right for your situation and needs.
What do I Need to Open a Basic Bank Account?
You’ll need to be able to confirm your identity and address. There are various ways that you can do this, and banks will often publish their own lists of ID formats they accept. However, if you’re struggling to come up with sufficient proof of ID and address, you should contact the bank directly to see if there’s anything else you can use.
Generally, banks accept the below forms of ID when setting up a basic bank account:
A full passport that’s in-date.
Your UK driving licence, whether that’s the photocard or full paper version.
An identity card from the Electoral Office in Northern Ireland.
An identity card from a member state of the European Union.
An HMRC tax letter.
Documents showing your entitlement to benefits. This can include your pensions, disability payments, or universal credit.
Make sure that you have at least one of these when you go to open your account. In some instances, you’ll need two, plus a valid proof of address.
Below, we’ve compiled a list of the best basic bank accounts on offer. Each has their own merits and features, meaning you have plenty of different options to choose from:
Nationwide Building Society Flex Basic
Available to those 18 and over.
ATM limit of £500 daily.
Can open via phone, branch, or online.
No monthly fee.
Nationwide’s Flex Basic account is ideal for those looking to get a handle on their finances. This no-frills account provides basic services, as well as features such as online and mobile banking, a contactless card, and a £500 ATM limit. However, it comes without such bonuses as a cheque book, overdraft, or insurance. You also don’t get interest on your credit balances.
Barclays Basic Current Account
A visa debit card.
Available to those 18 and over.
£300 daily ATM limit.
Cashback when using your account.
No monthly fee.
Barclays offers a really great basic current account that has all of the major features you need to get into the banking system. You can bank online, in a branch, or on your phone, and it’s easy to find out whether you’re eligible. The account is free to use and gives access to a visa debit card, direct debit options, and a cashback bonus from certain retailers. As is usual, you don’t get an overdraft or cheque book, and you don’t gain access to Barclays Blue Rewards scheme.
Virgin Money Essential Current Account
Available to those 18 and over from the UK and EU.
Options for both individual and joint accounts.
Available to those with no credit history, those currently bankrupt, and those with financial difficulties.
Monthly interest on your balance.
This account from Virgin Money is one of the best basic ones out there. Not only can you choose between an individual and joint account, but you can also earn some interest (0.75% AER) when your balance is in credit. You should be eligible even if you have had financial issues in the past, although you have to go into a branch to apply. You’ll need to take two pieces of ID, as well as three years’ address history.
Santander Basic Account
Offers no-frills banking to those with limited credit history,
Top-up debit card provided.
Available to those over 18 legally living in the EU.
Santander’s Basic Current Account offers those with poor or limited credit history, as well as newcomers to the UK, the chance to get a bank account with almost full functionality. You can receive your wages, benefits, or other regular payments and pay your bills using Direct Debits. Account-holders get a Santander Top-Up Visa debit card, allowing you to manage your spending.
Available to those aged 16 and over living in the EU.
Offers direct debit service and access to UK ATMs.
Application can be made in branch or by post.
Co-op offers their Cashminder account to those aged 16 and over who are legal residents of the EU. You can make your application either in person or via post, making it a viable option if you’re planning on coming to the UK. You will have access to Direct Debit services, as well as ATM machines. However, you won’t receive any interest on your account balance, unlike with some other accounts.