Bank Accounts - Safe and Basic
Everyone can have a bank account. Which one depends on your financial background and current situation. Most banks use credit reference agencies to assess your application. The good news is that even with a low credit score, there is a bank account product applicable to you called a 'Basic' Bank Account.
If you have an overdraft or any other debt with your bank, you will be advised to open a 'Safe' Bank Account. This is a type of bank account that does not grab your income to offset borrowing with the same bank.
A safe bank account will not be frozen while you are in a debt solution.
Basic Bank Accounts
A basic bank account is offered when you have a low credit score, i.e. if you have missed payments or have debts. Features include:
- there are no fees
- there is no overdraft facility
- set up regular payments
- you get a debit card
- can use a cash machine
- income can be paid in
- check your balance anytime
The banks & building societies listed below offer free basic bank accounts:
- Barclays - Barclays Basic Current Account
- Santander - Basic Current Account
- NatWest - Foundation Account
- Ulster Bank (Northern Ireland) - Foundation Account
- Royal Bank of Scotland (Scotland) - Foundation Account
- Royal Bank of Scotland (England & Wales) - Basic Account
- HSBC - Basic Bank Account
- Nationwide - Flex Basic
- Co-operative Bank - Cashminder
- Lloyds Banking Group (including Halifax & Bank of Scotland) - Basic Account
- TSB - Cash Account
- Clydesdale Bank & Yorkshire Bank - Readycash Account
- Virgin Money - Essential Current Account
Always check terms, conditions before you commit to a bank account.
The Financial Conduct Authority state that, from September 2016, you will be entitled to open a basic bank account if you are ineligible to open a standard bank account, unless it would be unlawful for the firm to open the account. The bank should give you an explanation if they turn you down. If you believe you have been turned down unfairly you may be able to complain to the Financial Ombudsman Service.
Safe Bank Accounts
A safe bank account is opened at a bank or building society with no debt owed to them. Reasons to switch are:
- you can budget better
- you won’t pay any fees
- you can prioritise bills
- your account won’t freeze
- you retain most features
- easy switching is possible
Debt Advice - Banking
Banks can freeze your accounts when a debt solution is notified to them, this prevents you getting any credit balance out until the account is unfrozen, you could be without any money over a weekend. Banks can also use 'right of set-off' if you owe any other debts to them.
- Visit your bank and ask them what will happen if you go ahead with a formal debt solution, can you keep the bank account you already have with them? (Never say you are doing a debt solution, just say that you are thinking about it.)
- Remember that the moment you mention a debt solution, your bank can take steps to remove an overdraft facility, if you are still using an overdraft and your income goes into an overdrawn account, this will cause you problems.
- Always make sure that you take enough money out of your bank accounts as you can before you make a formal debt solutiopn application, just in case of problems. Even banks that agree not to freeze an account have been known to do it in error.
- You might need to choose a sensible date to apply for a debt solution to make sure that you have enough money until the appropriate administrative steps have been taken.
- Your bank might advise you to open a safe bank account after a bankruptcy application has been ordered, if this is the case, you must prepare the right time to apply for bankruptcy without creating a lot of problems with essential payments and your income.
Banks offering Safe & Basic Accounts
The following banks/building society must now allow anyone in a formal debt solution, such as bankruptcy, debt relief order or IVA to open a basic bank account:
- Royal Bank of Scotland (Including Natwest)
- Lloyds (including Halifax and bank Of Scotland)
- Clydesdale and Yorkshire Bank
Usually the bank will check your eligibility for their current account first, before offering you a basic account. You must make it clear that you want to apply for a free basic bank account if you are about to enter into a debt solution. If you do not make this clear, you could be credit scored and your application may be rejected.
Other banks may let you open an account while in a formal debt solution, but will depend on their policies.
You should always check with the bank you choose whether you are allowed to open a safe bank account before or after a formal debt solution has been approved.
Digital banks are banks that do not have a hight street presence, their banking facilities are only available through a mobile banking app. These digital banks are sometimes referred to as 'challenger banks'. If you are able to use your smartphone or tablet with confidence, this type of banking might be a good option.
Digital Banks have simpler ways to approve you opening an account online, usually meaning that you are either lightly credit scored or not credit checked at all.
You should always check that they provider is regulated, you can check the approved Open Banking register.
Current account switch service
The majority of banks have a guarantee that will let you switch accounts within seven days. This is referred to as the Current Account Switch Guarantee. In addition banks will guarantee that payments in and out of your new account are switched over in time to ensure you do not miss any regular bills or payments.
Business Bank Accounts
If you enter a formal debt solution as a business, you will not be able to continue to use any previous credit lines, this will be an important consideration if you need credit to continue trading.
Business bank accounts like personal bank accounts can be run as a 'basic business account'.
The following are 3 main Banks that offer Business Bank Accounts for a person with a poor credit history:
The following providers do not perform a credit check:
You can also view our A to Z list of Digital UK 'challenger banks'.
Always check terms and conditions before you commit to a bank account.
Acceptable Identification (ID)
Below is a list of accepted identification:
- Full, current passport
- Current European Union member state identity card
- Current UK photocard driving licence or UK full paper driving licence
- Identity card issued by the Electoral Office for Northern Ireland
- Benefit books/benefit entitlement letters; includes pension, child benefit, income support, disability & jobseeker's allowance
- HMRC tax notification or assessment letter
Banks publish their own lists of acceptable ID so you should check these. You'll also need proof of address. 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 - it will be able to tell you if any other ID is acceptable.