A new fee-free basic bank account, launched in January 2016, is available for those who aren't eligible for a full-service current account – such as those with a poor credit history. This new account is easy to set up and free of most fees. It has all the standard features of a current account except for the option of using an overdraft.
1. What can you do with basic bank accounts?
Basic bank accounts already allow you to do many of the same things you can with a regular account. Depending on the account, you can make online and card payments, take money out at cash machines or in branch, get cashback at retail outlets and pay bills via Direct Debit or standing order. Income such as wages, benefits and pensions can be paid into a basic bank account. But you can't get an overdraft.
This new account is free of most fees
2. What's different about a fee-free account?
One main difference with a fee-free account is that they now have standard features and your bank or building society will not charge you for missed payments if you do not have enough money in your account to pay Direct Debits or standing orders.
3. Who can get one?
You should qualify for a fee-free basic bank account if you don't already have a bank or building society account and/or you are unable to open or use one due to financial issues, including poor credit history or being an undisclosed bankrupt. If you already have a basic bank account, you should check with your provider whether they have set up and moved yours to a fee-free version if that better suits your needs.
4. What do I need and how do I get a fee-free basic bank account?
Depending on which provider you choose, you can apply for a fee-free basic bank account in person, over the phone, online or by post. You will need to provide official proof of identity before you can open one. This could be a passport or driving licence. Your bank or building society will also ask you to provide proof of address.
If you don't have the documents your chosen provider asks for, there may be other ways to prove your identity, such as an original letter from DWP, HMRC, JobCentre+ or local council confirming your right to benefits, or another letter from a person in authority, so be sure to ask what they can accept.
5. Can I ever be charged for using my fee-free basic bank account?
There should be no fees on purchases or transactions made in the UK in pounds and you won't be charged if regular payments such as Direct Debits or standing orders are declined because you don't have enough money in your account. But you are still responsible for paying the money you owe and will need to make other arrangements.
Fees and charges could apply if you take out cash from cash machines in the UK that charge a fee, or from foreign cash machines; make online payments in a foreign currency, even if this is in the UK; or make payments with your card abroad.
6. Who offers fee-free basic bank accounts?
- Ulster Bank (Northern Ireland)
- Royal Bank of Scotland
- Co-operative Bank
- Lloyds Banking Group (including Halifax, Bank of Scotland & TSB)
- National Australia Bank Group (including Yorkshire Bank and Clydesdale Bank)
Thanks to The Money Advice Service.
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