In the wake of RBS/NatWest’s decision to restrict access to cash machines for their basic bank account customers, we look at just what basic bank accounts are, who they’re for and what services you can expect your bank to offer.
Basic bank accounts have been around since 2000 when the government told banks that they must offer accounts for people who have trouble opening an ordinary current account.
But you can be forgiven if you’ve never heard of them – banks rarely promote them as they are less profitable than other accounts.
They are intended for people who would otherwise be denied access to a bank account, primarily those with a history of credit problems or those with no credit history at all. Designed as simple accounts they come without an overdraft facility and can be used to receive wages, withdraw cash and pay bills.
Who can apply for a basic bank account?
Most basic bank accounts are available to anyone over the age of 16. Because you get limited services, however, you’re only likely to want to apply for one if you have difficulty getting a standard current account.
If you have a record of fraud you won’t be able to get one of these accounts and most, but not all, also decline applications from undischarged bankrupts.
What do you get with a basic bank account?
In many ways a basic bank account is very similar to a standard bank account. You can pay-in money and set up direct debits and standing orders.
Some give a debit card allowing you to withdraw cash and make purchases. Others, Santander for example, just offer a cash card. Of those that offer a debit card some only give you an Electron card which is less widely accepted that the standard Visa Debit and Maestro cards.
All offer online and phone banking and access to your account via the Post Office. Some restrict branch-based banking to some extent, see below.
What don’t you get with a basic bank account?
You won’t get a chequebook or an overdraft. But beware, you still need to monitor your account carefully. As you have no overdraft facility you could incur charges for returned items if you don’t have enough money in your account to cover a standing order or direct debit. And if you do go overdrawn you’ll be charged a high rate of interest.
Controversially RBS/NatWest has recently announced that it will exclude basic bank account holders from using cash machines that it doesn’t own. Lloyds TSB also only allows withdrawals from its own machines and Post Office branches.
Some banks have also been slated for restricting the access to branch-based banking for basic bank account customers.
Halifax Easy Cash customers, for example, can’t use a branch counter to pay-in money, make withdrawals of less than £300 from a branch counter or make routine enquiries such as balance enquiries. Instead it points its customers to its immediate deposit machines, that are only available in some branches, and its cash machines.
Like standard current accounts, most basic bank accounts won’t pay you any credit interest.
Basic bank accounts you pay for
Some companies offer basic bank accounts but which charge a set-up fee, monthly fee and in some cases fees for cash machine withdrawals. Thinkbanking, for example, offers a bank account with no credit checks but charges £25 for set-up and £14.50 a month thereafter. In return it doesn’t charge any fees if you go into the red or for bounced transactions.
Think carefully before choosing a fee-charging account such as this – a basic bank account from a bank will be free to use providing you don’t go overdrawn.
If you’re looking for a standard bank account, take a look at our Which? Best Rate current accounts.
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