New basic fee-free bank accounts will be available to those with a poor credit history and won’t have any fees for missed payments or returned Direct Debits.
Currently bank accounts are often out of reach to those with a poor credit history, leading many into borrowing or having to pay for ‘bad credit’ bank accounts which charge a monthly fee.
Under the new rules the basic accounts will allow those currently marginalised from mainstream banking to have access to basic banking.
‘A welcome overhaul’
Commenting on a new fee-free template for basic UK bank accounts that has been revealed by the Treasury, David Mann, Money Expert at uSwitch, says:
“This is a welcome overhaul of the basic bank accounts system. It is far better that people with money problems are helped to stay within the mainstream banking system, rather than excluded from it and forced to operate cash-in-hand or access unscrupulous payday lenders.
“Basic bank accounts don’t offer overdrafts or cheque books, but they do give people an account to receive income and make payments, ensuring they can set up direct debit payments and have access to the cheapest rates on utilities for example.”
Basic bank accounts
Nine of the UK’s high street banks have signed up to the agreement meaning 90% of the UK current account market will offer these basic accounts from the end of next year.
The agreement follows and EU directive issued earlier this year requiring all residents of the EU to have access to basic accounts with fair fees and giving them the opportunity to switch providers.
- Bad-credit accounts These are designed for those with a poor credit rating, but do charge a fee.
- Current accounts with authorised overdrafts Some bank accounts offer interest-free overdrafts for a few hundreds, others offer larger amounts but charge interest.
- Bad-credit loans Loans are typically the cheapest way of borrowing money over the long term, but tend to require good credit ratings, however there are lenders who will offer loans to borrowers with poor credit scores.