Bank Accounts - Safe and Basic
Everyone is entitled to a bank account, the type of bank account product you are entitled to usually depends on your financial background and your current situation. Most banks will use credit reference agencies to assess your application, but the good news is that even if your credit score is low, there is a bank account product applicable to you called a 'Basic Bank Account'.
If you operate a bank account overdraft or have other borrowings with the same bank, you might be advised to open a 'Safe Bank Account', which refers to a type of bank account that does not grab your income (right of set off) to offset an overdraft or other borrowing at the same bank. A safe bank account will not be frozen if you enter a debt solution.
What is a basic bank account?
A bank should offer you their basic bank account if you do not qualify for their current account. You are not likely to meet the criteria for a current account if you have missed payments for bills and debts.
A main advantage of a basic bank account is that it is an account with no fees attached to it. You will not have an overdraft facility, so therefore you cannot be charged interest on your account and there will be no fees either for returned direct debits or standing orders.
Since September 2016 the nine largest banks Barclays, Santander, Royal Bank of Scotland (Including NatWest), HSBC, Nationwide, Co-operative, Lloyds (including Halifax and Bank Of Scotland), TSB, Clydesdale and Yorkshire Bank are required to offer a fee-free basic bank account.
Whilst a fee free bank account with the above banks will generally have fewer features than a current account you can still do the following:
- set up direct debits and standing orders
- use a debit card to pay for items
- withdraw money from a cash point
- Have your income paid into the account (wages, benefits)
- check your balance at a bank, at a cash machine or online
Banks, other than the main nine, may offer a basic account, but might not include all the features listed above and in addition, may include charges. You should check before opening an account what features are offered and if there are any potential charges.
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.
What is a safe bank account?
A safe bank account is an account with a bank or building society with whom you have no debt.
If you do owe money to your bank or building society they can take money out of your account to pay off money you owe them, for example to pay credit cards, loans and overdrafts. This may leave you, with not enough money, for your essential expenses, or to live on. It is therefore important to make sure that any income, for example your wages or benefits, does not go into that account.
When you look to open a new safe bank account the bank will usually check eligibility first for their current account. If you meet their criteria for a current account then it is likely that the bank will offer you their current account. If they do open a current account and you don't wish to get into debt with the bank, you can request that you are not given an overdraft facility. If your account does go into an overdraft, it is likely you will start paying interest on your account and your money would no longer be safe, as the overdraft is repayable on demand.
Some banks, for example Royal Bank of Scotland and NatWest belong to the same banking group. Therefore when you open an account you should try to avoid a bank within the same group, otherwise your money may still be at risk of being taken.
Bank Accounts and problem debt
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 and 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.
The 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.