Safe bank accounts

 April 2019

Fact sheet no. 505 SCOT Safe bank accounts

Use this fact sheet to:

 

  • understand why you may need a safe bank account;
  • help you recognise the benefits of a basic bank account; and
  • try to find a suitable bank account for you to open.

What is a safe bank account?

Extra advice:

the Current Account Switch Service

Most banks have a guarantee that will let you switch accounts within seven days. This is called the Current Account Switch Guarantee. Banks will also guarantee your payments in and out of your new account are switched over in time so that you do not miss any regular bills and payments.

If you owe money to your bank or building society, it is important to make sure that any income, for example your wages or benefits, do not go into that account. This is because in some circumstances, banks and building societies can take money from your account to pay off your debt to them. This may leave you with too little money to live on, or to pay your essential bills. A safe bank account is an account with a bank or building society with which you have no debts at all. Debts include credit cards, loans and overdrafts.

When you look to open a new safe bank account the bank will usually look to see if you are eligible for their current account. If you meet the bank criteria for a current account then it is likely that the bank will offer you this type of account.

Important: 

business accounts

The rules about when banks can take money from business accounts to pay a debt to them can be very different compared to personal accounts. If you have a business account, contact Business Debtline on 0800 197 6026 or see www.businessdebtline.org.

If you do open a current account and don't wish to get into debt with the bank, you should request that you don't have an overdraft facility. If you do go into an overdraft then it is likely you will start paying interest on your account and your money would no longer be safe, as the overdraft is repayable on demand.

Some banks belong to the same banking group, for example Royal Bank of Scotland and Natwest. When you open a safe bank account you should try to avoid a bank within the same banking group, otherwise your money may still be at risk of being taken. Contact us for advice.

The Money Advice Service has lots of useful information on its website on how to open an account, including account features, what identification you will need and things you should think about. See www.moneyadviceservice.org.uk or phone them on 0300 500 5000.

What is a basic bank account?

You may not qualify for a bank’s current account if you have missed payments for bills and debts. If so, a bank should offer you their basic bank account instead. 

A main advantage of a basic bank account is that you can have an account which has no fees attached to it. As you will not have an overdraft facility you won’t be charged interest on the account and there will be no fees for returned direct debits or standing orders.

Since September 2016 the nine largest banks have been required to offer fee free basic bank accounts. These banks include Barclays, Santander, Royal Bank of Scotland (Including Natwest), HSBC, Nationwide, Co-operative, Lloyds (including Halifax and bank Of Scotland), TSB, Clydesdale and Yorkshire Bank.

Whilst a fee free bank account with the above banks will generally have fewer features than a current account you can do the majority of things that you would need to Including:

  • Set up direct debits and standing orders.
  • Use a debit card to pay for items and withdraw money from a cash point.
  • Have your income paid into the account.
  • Check your balance at a bank, at a cash machine or online.

Other banks, to those listed above, may offer basic bank accounts but they may not include all the features listed above or may include charges. It is important that you clarify the accounts features and potential charges with the bank before taking out a basic bank account with them.

The Money Advice Service has lots of useful information on its website on how to open a basic bank account. They have links to each banks basic bank account and also detail what identification you will need to open an account. See www.moneyadviceservice.org or phone them on 0300 500 5000.

The Financial Conduct Authority state that, from September 2016, you will be entitled to open a basic bank account if you are ineligible to open a standard bank account, unless it would be unlawful for the firm to open the account. If you can’t open a basic bank account the bank should tell you why you have been turned down. If this does not happen or you believe you have been turned down unfairly you may be able to complain to the Financial Ombudsman Service. Contact us for advice.

Bank accounts and bankruptcy

Barclays, Santander, Royal Bank of Scotland (Including Natwest), HSBC, Nationwide, Co-operative, Lloyds (including Halifax and bank Of Scotland), TSB, Clydesdale and Yorkshire Bank must now allow undischarged bankrupts to open a basic bank account. The bank will usually look to check your eligibility for their current account first, if the bank establish that you aren’t eligible for a current account due to being an undischarged bankrupt then they should look to offer you their basic account. Other banks may let you open an account as an undischarged bankrupt; you would need to check the banks policy before applying.