A Basic Bank Account allows you to manage day-to-day money and will usually provide you with a bank card but will not let you become overdrawn. Your wages and benefits can be payed directly into it, and bills can be payed direct from your account.
You may want to use a fee- free Basic Bank Account if you are worried about overspending and don’t want to go overdrawn, or if you may have a bad credit rating due to previous debt.
These accounts allow wages, benefits and state pensions to be automatically paid into it, and automatic bill payments to be paid out direct from your account (these are called direct debits)
Banking Cards
Basic Bank Accounts will usually offer cards that let you pay for items without cash (this is called a debit card). Alternatively some banks provide a card that allows you pay for goods or services and to get money out of cash machine (this is called a prepaid card). A prepaid card is like a pay-as-you-go mobile phone – you top it up with money in advance but can only spend up to the amount loaded on your card.
For more information on types of banking cards, click here.
Managing your account
For more information on paying money in, click here.
For more information on paying money out, click here.
A Basic Bank Account will not give you a chequebook, and you cannot take out more money that is in the account (go overdrawn).
For more details on basic bank accounts, including the ability to compare common features of current accounts against current accounts and savings accounts, click here.
A downloadable booklet explaining Basic Bank Accounts is available from MoneyHelper.
Government Agreement
The Government has come to a new agreement with the banking industry which will mean that basic bank accounts are ‘fee-free’ which should help to improve financial inclusion and increase access to banking services. This is particularly important for those who are likely to claim Universal Credit in the future. Universal Credit needs to be paid into a transactional bank account and claimants will need to be able to make payments for rent and other bills. Removing charges for failed direct debits or standing orders should reduce the risks associated with using these payment methods.
Full details of the agreement are available at GOV.UK.
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