What are the Benefits of a Basic Bank Account?

No Need for Cheque Cashing Services with a Bad Credit Bank Account

Apr 1, 2009

A bad credit bank account was once a rarity. However, the reliance on cheque cashing services has been alleviated through the introduction of basic bank accounts.

Most consumers can open a basic bank account, subject to the provision of satisfactory identification. Bad credit bank accounts used to be a rarity, but those with County Court Judgements (CCJ's), loan defaults and missed or late payments now have options. A basic bank account allows customers to send and receive money, such as wages and state benefits. Cheque cashing services are no longer essential to deal with short term money problems.

A Bad Credit Rating is No Obstacle

Highstreet banks want business, but they perform credit checks on all potential customers. A bad credit rating will result in a customer being declined for a bank account with overdraft facility. Until the introduction of basic bank accounts, it could prove virtually impossible to get a bad credit bank account. It is also a bank account for undischarged bankrupts.

Pay-in and Withdraw Cash with a Basic Bank Account

Not being able to pay-in money can create money problems for families. Basic bank accounts were primarily introduced to prevent social exclusion and provide those with a bad credit rating or low income somewhere to deposit wages, state benefits and cheques.

No Need for Cheque Cashing Services

Whilst it still takes 3-5 days for a cheque to clear, it does mean that low income families don't have to rely on fee-based cheque cashing services. Most cheque cashing services charge customers 5-10% to clear a cheque on the same day.

Pay Standing Order and Direct Debits

All basic bank accounts have the facility to set-up direct debits and standing orders. This helps to prevent money problems through better cash management. There are also a number of companies offering low income families a discount for paying by direct debit or standing order.

Basic Bank Accounts with Online Banking

Banks that offer mainstream customers online banking also offer the same service to those with a bad credit bank account. This isn't some act of benevolence; they offer online banking to bad credit customers to lessen the strain on their counter service. However, customers benefit because they can manage family finances from home, which can help with personal budgeting.

A Bad Credit Bank Account with a Cash Card or Debit card

All basic bank accounts offer a cash card that allows customers to withdraw up to £300 per day. Some basic bank accounts offer a debit card, such as a Visa Electron or Solo card. For example, the Halifax easy cash account offers a Visa Electron card and the Nat West Step Account offers a Solo card.

Consumers that are being rejected for mainstream accounts because of a bad credit rating are advised to open a basic bank account. The functionality is more limited, but it is somewhere to pay-in wages and avoid the need for a cheque cashing service. CCJ's, loan defaults and missed or late payments are not an obstacle to getting a bad credit bank account.

If a bad credit rating has been caused by default on a credit agreement signed-up to prior to April 2007, it is worth checking whether an illegal credit card or unenforceable loan agreement is in place. This could lead to the debt being written off and any adverse credit entries being removed.

The copyright of the article What are the Benefits of a Basic Bank Account? in Personal Budgeting/Finance is owned by Asa Ghaffar. Permission to republish What are the Benefits of a Basic Bank Account? in print or online must be granted by the author in writing.