In 2016 the major UK banks all introduced new basic bank accounts. One of the main aims was to widen bank account access to groups of people who have found it difficult or impossible to open an account.
It also other people who are likely to be refused a standard current account because of a poor credit rating. People in an IVA, DRO or debt management need to change bank accounts and have the overdraft on their own account included in the debt solution. And people whi have gone bankrupt previously found it very hard to get a bank account.
Many people with poor credit records who aren’t in any form of debt solution are desperate to escape from their old account with its huge overdraft, so they can start paying it off.
All these people should be able to get a new style basic bank account.
These new-style basic bank accounts are great! They all let you:
- set up direct debts debits and standing orders;
- have a debit card (not all offer a contactless one and Santanders is just compliacted, see below); and
- have access to internet banking (Virgin only allows a restricted version, missing some facilities.)
And the best bit is, if there isn’t enough money in your account to pay a direct debit or standing order, the payments won’t be made (so you don’t go overdrawn) but you will not be charged a fee for rejecting the DD.
Who offers these new accounts
You should be able to open one of the following bank accounts if you have major problems on your credit record including if you are an undischarged bankrupt or in an IVA:
- Bank of Scotland basic account
- Barclays basic current account
- Co-op Cashminder account
- Halifax Basic Bank Account
- HSBC Basic Bank Account
- Lloyds Basic Account
- Nationwide FlexBasic account
- RBS (includes NatWest and Ulster Bank) Foundation Account
- Santander Basic current account
- TSB Cash account
- Virgin Essential Current Account
- Yorkshire Bank (includes Clydesdale) Readycash account.
The only reasons you should be refused one of these accounts are if you could get a “normal” bank OR if there is a fraud marker on your account.
If you have an application turned down, ask the bank why – it has to give you a reason. If you have had any problems opening one of these accounts please let me know, for example by adding a comment at the bottom of this article.
My “top pick” is Nationwide
The Nationwide account has a contactless debit card, full mobile and online banking, text alerts and you can open it online.
If you already had a full current account with Nationwide before going bankrupt and you were not using your overdraft, they will normally offer to convert your account into a basic one. Here your sort code and account number stay the same and all your DDs and STOs stay in place , so it is hassle free.
If you are having difficulty getting an application approved because of id issues, Nationwide, Barclays, Co-op and Virgin Money have a reputation for being helpful.
Two to avoid – Lloyds and Santander
From what I have been told, you can’t apply for a basic bank account with Lloyds directly – you have to go through the hassle of applying for a “normal” current account and then be rejected first. This is a very poor way to treat customers.
The problem with the Santander basic bank account is that the ATM card isn’t a chip & pin one, so you can’t use it in a shop. So they provide you with a “Visa top up” card which you have to pre-load with money from your basic bank account. This is a completely unnecessary faff – better to go to a bank which gives you a proper card debit card for the account.
Use your existing basic account?
If you already have a basic bank account that you would like to carry on using after you go bankrupt, you MUST go into your branch and ask them what their policy is. Some banks may let you keep this basic bank account, others (including Barclays) may say that account will be frozen so you will need to open another one.
Open a new account before or after you go bankrupt?
It may feel like a good idea to open one of the above basic bank accounts as part of your preparation for going bankrupt – this will allow you to get your salary and any benefits paid into the new account. If you want to do this two things are important:
- check that the new account isn’t going to be frozen when you go bankrupt!
- if you own any money to the bank you have chosen, don’t put much money into it prior to bankruptcy as the bank may help themselves to the money in the new account using the “right of set-off” clause in the small print. (This isn’t a problem AFTER you have gone bankrupt as then your debts don’t exist anymore so the bank can’t use right of set off.)