New Fee-Free Bank Accounts Could Help Bankrupts

One the results of declaring bankruptcy is that you’ll usually need to close your existing bank account and open a new one – often with fewer services and stricter terms than your old account. Previously, this has meant that some bankrupts have struggled to find a new bank account that meets their needs. But as of 1 January 2016, nine UK bank and building society groups are offering a new breed of basic accounts that could solve these problems.

free basic bank account

Why have the new accounts been introduced?

The new accounts have been launched after the Treasury reached an agreement with the banking industry in December 2014 to widen access to fair, affordable bank accounts. According to a report by the Financial Inclusion Commission, published in March 2015, around two million UK consumers don’t have, or can’t access, any bank accounts whatsoever. As a result, this group has to pay around £1,300 a year more to access financial services than people who have a bank account.


The Treasury is hoping that around nine million consumers will benefit from the new basic bank accounts. It’s part of a long-term Government plan to make sure everyone in the UK has access to basic banking and financial services, and that the banking industry has something to offer every consumer group.


What’s different about the new accounts?

A key difference with the new accounts if that they’re designed to be truly fee-free. This means that you won’t be charged a fee if a Direct Debit or Standing Order is returned unpaid and, because the new accounts will have no overdraft facility at all, you can’t incur authorised or unauthorised overdraft charges either.


This is important because in the past, some banks were charging financially vulnerable customers up to £35 for each failed payment, followed by further fees for going into an unauthorised overdraft. These fees were uncapped, so customers could potentially incur hundreds of pounds worth of fees – making an already bad financial situation much worse.


With the new basic accounts this can’t happen, offering invaluable peace of mind to vulnerable groups such as bankrupts, who tend to be on strict budgets with no money to spare for unexpected costs.


What are the other benefits?

These include:

  • The terms and conditions of the new basic bank accounts will be on a par with those of standard bank accounts.
  • Account holders will have access to more services, including the right to make over-the-counter transactions in bank and building society branches, and to use cash machines.
  • Debit cards on some accounts, enabling customers to shop online and over the phone as well as in person.


The Government hopes that the new accounts will also offer linked benefits, such as helping unemployed people get a job or access training and develop opportunities. Social inclusion is also an important aspect, as the inability to access banking or financial services can sometimes isolate people from mainstream society.


Who can get a new basic bank account?

The new accounts are aimed at three main groups of consumers:

  • People who don’t already have a bank account.
  • People who can’t open a standard current account for any reason, which could include bankruptcy or being subject to another form of personal insolvency such as an Individual Voluntary Arrangement, Protected Trust Deed or Debt Relief Order.
  • People who can’t use their existing bank or building society account because of financial problems, i.e. their account has been frozen. Again, one of the reasons for this could be bankruptcy or a different debt solution.


How can I open a basic bank account?

If you’re interested in opening one of the new accounts, simply contact one of the providers listed below and ask them about their fee-free accounts:

Bank or building society Basic account name
·      Barclays ·      Barclays Basic Current Account
·      Co-operative Bank ·      Cashminder
·      HSBC ·      Basic Bank Account
·      Lloyds/Halifax/Bank of Scotland ·      Basic Account
·      Nationwide ·      FlexBasic
·      Natwest ·      Foundation Account
·      RBS England and Wales ·      Foundation Account
·      Royal Bank of Scotland (Scotland) ·      Foundation Account
·      Santander ·      Basic Current Account
·      TSB ·      Cash Account
·      Ulster Bank (Northern Ireland) ·      Foundation Account
·      Yorkshire and Clydesdale Banks ·      Readycash Account

Andy Gorton is the author and editor of the Bankruptcy Clinic

Andy Gorton – who has written posts on Bankruptcy Clinic Blog.

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