Better times for basic bank accounts

Fees on basic bank accounts will be scrapped, after the Treasury reached an agreement with the major banks to change how they work.

 
Better times for basic bank accounts

But what are basic bank accounts? And what are the fees being scrapped all about? Here’s a quick Q&A to bring you up to speed.

Q. What is a basic bank account?

A. A simple, no-frills bank account without a cheque book or overdraft facility – basically, an account which doesn’t let you borrow from the bank.

Q. What can I use a basic bank account for?

A. Most basic bank accounts allow you to:

  • Have your wages, benefits, pension and tax credits paid in
  • Pay in cheques or cash over the counter
  • Withdraw cash from an ATM or over the counter
  • Pay your bills via direct debit or standing order
  • Check your account balance

Q. Who are basic bank accounts aimed at?

A. Around 9million people in the UK use basic bank accounts. Anyone over the age of 16 and with a fixed address can get a basic bank account, but they are primarily geared towards people with poor credit histories who might struggle to be accepted for a conventional account.

You don’t need to worry about being accepted or rejected for a basic account because there’s no credit check to pass or fail.

“Nine of the major high street banks have signed up for scrapping the fees...”

Q. What’s changed?

A. The government’s Treasury has just made these accounts properly free by scrapping the charges levied when a direct debit or standing order bounces.

Until now, this could’ve cost you as much as £30 in the first instance – and if you didn’t pay the fees, the amount you owed could’ve increased.

Nine of the major high street banks have signed up for scrapping the fees, which means the vast majority (90%) of banks are on board.

Q. Which banks have signed up?

A. TSB, RBS Group, the Co-operative Bank, Barclays, Santander, HSBC, Lloyds Banking Group, Clydesdale and Yorkshire banks and Nationwide building society.

Q. When will things change?

A. Banks that have signed up have until the end of next year to start offering fee-free basic bank accounts.

Q. What do the experts think?

A. The government’s economic secretary, Andrea Leadsom, says the changes will effectively end people being locked out of their basic bank accounts because of high fees and charges when payments fail.

Debt charity StepChange also welcomed the news: “Many people fall into debt through unexpected life events, and it should not be that they are then hit with disproportionate charges that risk turning a temporary financial struggle into a more serious cycle of debt.”

And Kevin Mountford, head of banking here at MoneySuperMarket, said: “It’s essential all consumers have access to basic banking facilities in order to conduct their everyday lives now, so this is a welcome move from the government.”

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

Did you enjoy that? Why not share this article

SAVE MONEY NOW

Other articles you might like

Popular guides