Understanding your energy usage
Even if you’ve struggled with debt in the past and you have a low credit rating you should still be able to open a current account with most banks and building societies. But it may be a ‘no-frills’ or basic bank account, which won’t provide features such as an overdraft.
Basic bank accounts are generally available for people with poor credit scores to provide a place to safely pay in, store and access their money. As long as you’re aged 16 or over and have a form of photo identification, then the option of a basic bank account should be available to you.
Basic bank accounts work in a similar way to standard current accounts but are more restricted. You can deposit and withdraw money, plus 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.
But they don’t offer you 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 cheque book. 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.
There are a number of things you can do with a basic bank account, including:
They’re free to open and let you bank online, on your phone and in bank branches
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
The main difference is that basic bank accounts don’t offer overdraft facilities.
Basic banks accounts are stripped-back versions of current accounts, so you also won’t be offered the same perks as you might with a standard current account, such as cashback or other rewards. You also won’t usually be able to earn any interest on your credit balance.
However, you won’t be charged a monthly or annual fee for a basic bank account, and you won’t be charged for any failed payments as the account is designed never to let you slip into the red.
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 address, such as a driving licence or passport
You might need to provide your employment 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.
If you apply for a basic bank account, the bank may check your credit history, but the result won’t usually affect your application because the credit check is only done for identification purposes.
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 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.
The only people who can't have a basic bank account are people with criminal convictions for fraud.
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:
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
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
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.
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
Aiming not to miss debt repayments by setting up direct debits
Updating your address on all your accounts
Making sure you’re not still financially linked to an ex-partner or housemate
Avoiding applying for more financial products than you really need
Closing any credit accounts you no longer use
Checking your credit file for an 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.
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:
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.
On the plus side, they may also provide the option of cashback in certain stores to offset the fee and allow you to take out small loans. As a member, you can also attend meetings and be involved in the decision-making processes of the credit union itself.
You will usually need a connection with an existing member of the union to be eligible to apply.
A Post Office card account provides you with an account where you can pay in your benefits, State pension or tax credits. But 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 the receipt of State benefits.
These are debit-card-based accounts that act like a bank by allowing you to pay in income and your bills by direct debit.
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. So 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).
If you’re looking for a new current account, then MoneySuperMarket can help.
We compare accounts from across the market, including where there is a cash incentive for switching.
Our filters can narrow down your options based on the type of current account you need, such as high interest or student accounts.
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.
Everything you need to know about the wonderful world of car insurance.
Our guide will help you protect your property and possessions.
Discover how to bring down the cost of a major household bill.
Our definitive guide to choosing the right credit card.
Find out how to choose the right life insurance for your needs.
What to consider when picking a current account.
See how travel insurance can help protect your holiday.
Understand the difference between secured and unsecured loans