Millions of bank customers across Britain stand to benefit by hundreds of pounds as nine major banks launch fee-free basic bank accounts from 1 January.
The accounts will be available to anyone who doesn’t already have a bank account, is ineligible for a standard current account or who can’t use their existing account due to financial difficulty.
Bev Budsworth, MD of The Debt Advisor Ltd adds “This is particularly great news for all individuals who have struggled to open bank accounts because of poor credit rating and also for those who find they are pushed into the red by excessive charges when they have inadequate funds to meet payments. The debt solutions industry have long campaigned for this to happen. This will mean that if individuals need to consider a debt solution such as an IVA, they will be able to set up a basic bank account as they need to ensure their income is banked each month into an account that has no overdraft and where banks cannot grab their money to set-off against other debt owed to that bank or lender”.
The announcement on the 27 December 2015 follows last Christmas’ landmark agreement between the government and the banking industry to establish new basic bank accounts that will end bank charges if a direct debit or standing order fails.
In some cases, charges had been as high as £35 per failed item, and uncapped, meaning charges could accumulate to hundreds of pounds over time and drive people into serious debt.
The changes will remove the risk that basic bank account customers will be forced into overdraft because of these fees and charges.
Basic bank account customers will now also be offered services on the same terms as other personal current accounts that the banks provides, including access to all the standard over-the-counter services at bank branches and at the Post Office, and access to the entire ATM network.
Existing basic bank account customers should ask their bank whether they could still be charged if a direct debit or standing order fails, and whether they are eligible for a new basic bank account.
There are an estimated nine million basic bank accounts in the UK.
Economic Secretary Harriett Baldwin said:
Making sure that everyone in Britain has access to basic banking and financial services is at the heart of our long term plan.
That’s why I’m delighted that for the first time, truly fee-free basic bank accounts will be available to anyone who doesn’t already have an account, or isn’t able to use their existing account due to financial difficulty.
This is a key step forward in ensuring that our banking industry works for everyone.
Sian Williams, Head of the Financial Health Exchange at Toynbee Hall, said:
We know from our work with the financially excluded that a transactional bank account is essential for getting and sustaining a job and a home, as well as for accessing opportunities to study and take part in wider society. We therefore fully support the new Basic Bank Account initiative to ensure everyone has access to a bank account.
We particularly welcome the commitment that the poorest and most vulnerable customers will be protected from the account fees and charges which can unintentionally lead to self-exclusion or unmanageable debt.
We are confident that these new accounts will play a significant role in reducing the number of unbanked and underbanked individuals even further, and we look forward to working with the banking sector and HM Treasury to monitor the implementation of the new account standards and to seeing the difference they will make for some of the most vulnerable in our society.
The banks and building societies that have signed up to offer a basic bank account from 1 January 2016 and their corresponding bank account product are:
- Barclays – Barclays Basic Current Account
- Santander – Basic Current Account
- NatWest – Foundation Account
- Ulster Bank (Northern Ireland) – Foundation Account
- The Royal Bank of Scotland (Scotland) – Foundation Account
- RBS England & Wales – Basic Account
- HSBC – Basic Bank Account
- Nationwide – FlexBasic
- Co-operative Bank – Cashminder
- Lloyds Banking Group (including Halifax and Bank of Scotland brands) – Basic Account
- TSB – Cash Account
- National Australia Bank Group (including Yorkshire Bank and Clydesdale brands) – Readycash Account
There are a range of debt solutions available for individuals struggling with debt and the right type of solution depends on your circumstances. If you are struggling with debt issues please give our team a call on 0800 0851 825 or use our contact form. Our advisors can speak with you about all available debt solutions such as Debt Management, IVAs, Bankruptcy and Debt Consolidation.
All debt solutions need to be carefully considered. IVA’s are formal solutions and failure to keep to the terms can result in your IVA failing and you could end up bankrupt.
There is also free debt help and advice available through a variety of debt charities. For more information, we recommend you visit www.moneyadviceservice.org.uk.
The Debt Advisor is authorised and regulated by The Financial Conduct Authority (reg no: 606669). We are also a member of the Debt Resolution Forum and we adhere to their codes and standards.