Many people have had financial problems recently, largely due to the current dire state of the economy and this has left many with poor credit scores. However, there are a few ways of improving this frustrating state of affairs. Opening a new basic bank account can often be one of them.
Basic bank accounts were introduced in 2003 by the government in order that everyone could have some kind of account. Because these days most companies prefer to pay salaries straight into employees’ bank accounts, not having one can be a problem. While as you might expect basic bank accounts are just that – basic – they can offer many of the functions and benefits you get with a standard current account.
Who Can Get One?
Unlike standard current accounts, a bank account in its basic form can be obtained by anyone. In fact, you don’t even need to be on the electoral roll. Essentially, they are suited to those who have never had a current account before and who are not looking for overdraft facilities. However, they are perhaps most important to anyone who is having trouble securing a standard current account due to bankruptcy or low credit scores.
While no overdraft option is available with a basic bank account, they have many other benefits. One of them is that you can pay all your bills on time by setting up direct debits. Not only will this afford you peace of mind, but it may also lead to a better deal as many companies such as electricity and gas suppliers offer lower rates if you pay by direct debit.
In addition, you can not only have your salary paid straight into the account but also any benefits such as pensions, tax credits and income support. Getting access to the money is no problem either because with a basic bank account you get a debit card that allows you to withdraw cash from an ATM. There are a few more benefits that are available from certain providers:
– Free monthly service charge (generally for the first 6 months)
– Guaranteed acceptance regardless of credit score
– Options to manage the account online
– Cash rewards of at least £5 per month
– No charges for missed direct debits or standing orders
– Free ATM withdrawals (UK only)
– Free purchase protection
– Cashback each time you spend on your card
However, perhaps the best benefit of getting a basic bank account is that you can start establishing a good banking history or regain one if you have had financial problems in the past. Obtaining a basic bank account and managing it properly for a year or two will get anyone with bad financial history back on the road to recovery. You will find that your poor credit rating will soon start to slowly creep up, allowing you the option of applying for a standard current account.
Sam is a journalist who writes about various personal-finance issues for MoneySupermarket.com and a number of other web sites and blogs.