Basic Bank Accounts Explained
A basic bank account is often the best option for those who aren’t eligible for a standard bank account due to bad credit. Our guide explains basic bank accounts and who they’re best suited to
What is a basic bank account?
Basic bank accounts work like standard current accounts but with some limitations. With a basic bank account, you can deposit and withdraw money, set up direct debits and standing orders. You’ll also be given a debit card so you can make payments in-store and online and withdraw cash from a cash machine.
However, basic bank accounts don’t offer an overdraft facility – so you can’t spend more than is in your account and go into the red. And you’re unlikely to be offered a chequebook. Unlike some current accounts, basic bank accounts don’t charge a monthly fee and you also won’t be charged a fee for a failed payment.
What are the main features of a basic bank account?
There are several features and functions of a basic bank account, including:
Free to open
Can bank online, in branch or on your phone
You can deposit and withdraw money
You’ll usually be given a debit card so you can make payments online, in store and withdraw cash from ATMs
You’ll have the ability to set up direct debits and standing orders
There are no monthly fees or fees for failed payments
You won’t be offered an overdraft
You’ll get regular statements and free text alerts to help you control your spending
What is the difference between a basic bank account and a standard current account?
The main difference to standard current accounts, is that basic bank accounts don’t offer overdraft facilities.
Basic bank account
Depends on provider
Monthly or annual fee
Charge for failed payments
Depends on provider
Interest on credit balance
Yes, if it's a high-interest current account
How do I open a basic bank account?
To open a basic bank account, you’ll need to be:
At least 16 years old (18 in some cases)
Provide proof of identity and UK address, such as a driving licence or passport
You may need to provide your employment or income details
You’ll be able to apply for most basic accounts online, over the phone, by post or in person at your local branch. Some providers will want to check whether you’re eligible for one of their current accounts first. There might also be terms and conditions in place, such as not having an existing bank account with another UK bank.
Can I switch basic bank accounts?
You can switch basic bank accounts. All you need to do is open a new basic account with your new provider and they’ll take care of the seven-day switch. Meaning, your new bank switches your payments and transfers your balance.
Depending on who you bank with, you may be able to switch providers when opening a basic bank account. Some banks require you don’t hold a bank account with another UK provider for you to open a basic bank account with them.
If you do switch basic bank accounts with the major banks, it’ll likely fall under the Switch Guarantee (when your new bank switches your payments and transfers your balance).
Am I suitable for a basic bank account?
A basic account could be best for you if you fall into the following categories:
You have bad credit: If you have a bad credit score, you might find it harder to open a standard current account. If you open a basic bank account, the provider may still run a credit check on you. However, this is done for identification purposes instead of ruling you out of opening an account.
As basic bank accounts don’t offer overdrafts it can make them a good option for people who have bad credit. You won’t be able to borrow more than is in your account so it will stop you sliding into the red.
Just want a no-frills bank account: If you want a simple bank account for day-to-day spending then a basic bank account could give you what you need. A basic bank account is more restricted than a standard current account but there are no usage fees and if you’re looking for a ’stripped-back’ banking experience then it might be right for you.
Can I be refused a basic bank account?
It’s unlikely you’ll be refused a basic bank account because of a history of bad credit. But you could be refused a basic bank account if you don’t meet the eligibility criteria, such as minimum age (16 or 18), or you don’t have proof of ID and UK residence.
You could be refused if you want a basic account but the bank in question decides you are eligible for a standard current account. Customers with basic accounts could also be upgraded by their bank from a basic account. In this case you’ll be told in writing that your account is changing.
You’re also unlikely to be able to get a basic bank account if you have a criminal conviction for fraud.
What are the pros and cons of a basic bank account
There are a range of advantages to having a basic bank account – compared to having no account. But these accounts don’t offer all the services and features of standard current accounts. Here are some of the pros and cons:
Advantages of a basic bank account
Provides a safe home for you to manage your money – wages, pensions and benefits can be paid into the account instead of dealing in cash
Deposit cash and pay bills, including through direct debit and standing order
Pay for goods and services online or in person with a debit card
Learn to manage your money on a day-to-day basis
Stops you spending more money than you have
Prevents you being charged fees for overspending
Disadvantages of a basic bank account
No overdraft means no flexibility to borrow money for a short period
Won’t offer as many perks and rewards as some standard current accounts
Often won’t pay interest on the money you have in the account
What charges come with a basic bank account?
Basic bank accounts are not completely free to use. In most cases, you will have to pay fees if you use your debit card abroad. You will also be charged a fee between £17 and £30 if you make a CHAPS payment (these are payments to UK accounts that are guaranteed to arrive on the same day if you make them before a certain time).
How to upgrade a basic bank account?
Banks would prefer their customers to have standard rather than basic current accounts because they tend to make more money from them in fees and overdraft interest charges.
This means that as long as you meet the eligibility criteria, including your credit rating being acceptable, they’ll typically be keen to upgrade you to a standard current account.
Some banks will even be proactive in doing this and will give you notice to say they are changing the status of your account.
If you wish to take the lead, banks may offer a ‘soft search’ eligibility check you can take. This won’t leave a mark on your credit file, but will tell you whether your application to upgrade is likely to be accepted.
If you clear the check, then contact your bank either by phone or online to ask for an upgrade and they’ll take care of it.
How to improve your credit score
If your credit score is low it may not be possible to upgrade from a basic bank account to a standard account. But there are steps you can take to improve your credit rating. These include:
Repaying some of your loans and debts
Registering on the electoral roll
Setting up direct debits to avoid missing repayments
Updating your address on all your accounts
Making sure you’re not still financially linked to an ex-partner or housemate
Avoid applying for more financial products than you need
Closing any credit accounts you no longer use
Checking your credit file for errors which could be harming your score
You can also take control of your credit score with our free credit monitor service. Check your credit report and score and get free personalised tips on how to improve it
Worried about bad credit? Our comprehensive guide has more ways to improve your credit score.
What are the alternatives to a basic bank account?
If you don’t wish to open a basic bank account and have a poor credit history, there are some alternative options available, such as:
A credit union account
Credit unions are non-profit financial organisations set up to benefit a community where the members tend to have something in common, such as living nearby or working in the same industry.
A few credit unions offer bank accounts to those with a poor credit rating, but there may be a monthly fee – and you might have to commit to retaining a specified minimum balance in the account.
As a member, you can also attend meetings and be involved in the decision-making processes of the credit union itself.
To join a credit union, you will usually need to have a connection with an existing member. So, for example, you go to the same church, they’re your colleague or you live near each other.
Post Office card accounts
A Post Office card account provides you with an account where you can pay in your benefits, State pension or tax credits. The Government has announced it is closing the card account at the end of 2022.
While those with an existing card account can continue to use it , for now, Government is keen to move existing users over to traditional bank accounts, including basic bank accounts or the new payment exception service - for those in receipt of State benefits.
Prepaid bank accounts
These are debit-card-based accounts that act like a bank by allowing you to pay in income and your bills by direct debit. But they do not offer an overdraft or borrowing facility.
While prepaid card providers don’t run a credit check, they often charge monthly fees, cash withdrawal fees and even fees for standing orders or direct debits. It means this can be a more expensive way to manage your money.
Prepaid accounts can be topped up at pay points, post offices and via automatic bank transfers (BACS payments).
Other useful guides
Here at MoneySuperMarket, we have a range of guides you can read about banking:
Compare current accounts with MoneySuperMarket
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When you find the account you’re after, click straight to the provider to complete your application. Sit back while your new bank takes care of the switch.