Why open a Basic Bank Account?

Category: Banking
Date: 1/14/2011

What is a Basic Bank Account?

Basic bank accounts are aimed at people who have no credit history or a poor credit history and who won't be eligible for a normal credit card. Credit checks are used by banks setting up a current account so they can offer an overdraft facility.

A basic bank account offers some of the facilities of a current account, but not all of them. You'll generally be able to receive money such as salary, pension or benefits payments, pay bills and set up direct debits and standing orders, and you'll get a cash card so you can use cash machines.

You won't get an overdraft facility but some accounts provide a debit card and if you look hard enough you might even get a Mastercard. Most accounts don't pay credit interest, and those that do tend to be at a low rate.

Basic bank accounts can be accessed and operated in a number of ways, such as at the bank branch, on the internet, over the telephone (telephone banking) and even at the Post Office.

If you run your basic bank account well, you may well be able to upgrade to a full current account or packaged account, which will allow you to improve your credit rating. Think of a basic bank account as a stepping stone to getting better financial products in the future.

Who should apply for a Basic Bank Account?

• A basic bank account is suitable for anyone who wants access to the banking system but isn't eligible for a current account;
  

• People who don't want to have access to an overdraft, and are willing to give up some of the facilities available with current accounts.

Things to remember when searching for a Basic Bank Account

Basic bank accounts tend to be fairly standard but there are some differences:

• Interest - most basic accounts don't pay interest, very few offer a small amount of interest on cash left in the account.

• Debit cards - more and more basic bank accounts now offer a Visa, Maestro or Visa Electron debit card with your account, very few offer Mastercard. If you want to shop online, and don't have a credit card, you'll need to choose an account that offers a debit card. Note: The Visa Electron card requires that all the funds be available at the time of transfer, i.e., Visa Electron card accounts may not be overdrawn.

• Cash Machines - make sure that your account allows access from a wide range of cash machines and that these transactions are free.

• A small number of accounts provide a cheque book, or the ability to sweep some of the money into a savings account on a regular basis.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at anytime.