About 5 percent of UK households don’t have a bank account. That number has dropped precipitously since the 1990s, and nearly all the decrease was in the early 2000s. What are the innovations that made bank accounts more accessible for people with bad credit?
If You’re Rejected
If you’re turned down due to poor credit history, ask the bank what you must do to qualify for an account. Sometimes they won’t tell you, but sometimes they will. Many customers find that it’s simply a matter of paying off a small outstanding debt or clarifying an inaccuracy. If it’s just not possible to qualify for a regular bank account, all is not lost.
Basic Bank Account
These limited accounts are a good option for people who have a poor credit history but want the convenience of a traditional deposit account. You can retrieve cash from an ATM, have funds directly deposited into your account, cash and deposit paper cheques and enjoy some other benefits.
Basic bank accounts (see: www.bankaccounts-for-badcredit.com) are very much “no-frills.” Most banks won’t issue paper cheques, and they may not even issue a debit card. If there’s an overdraft, the fees are usually even higher than normal. You may not be able to set up some standing orders, and you’ll almost certainly not earn interest or receive overdraft protection.
The good news is that many customers are eligible for an upgrade after a few months. For example, some banks may convert basic bank customers to a standard account if there are funds directly deposited into the account, and there are no overdrafts during a probationary period of perhaps three or six months.
You may also be able to negotiate with the bank; for example, perhaps you’d be willing to pay a higher service fee in exchange for a debit card. Remember that the worst thing that can happen is that the bank will say “no,” and you don’t get anything unless you ask.
Post Office Card Account
If you receive certain government benefits, such as a pension or a tax credit, you may be eligible for this limited bank account. If approved, your funds go directly to the account. You can get cash or check your balance at any Post Office. There are no overdraft or similar fees.
While a basic bank account may come with a debit card, there is no way to withdraw money from a post office account other than obtaining cash at a branch. So, a post office account is a useful emergency measure that allows you to keep receiving needed benefits while you find other banking arrangements.
Prepaid Money Cards
Many retailers, pawn shops and banks offer loadable debit cards. You can load funds through direct deposit, online transfer or a cash deposit, and spend the funds using a debit card. There is no possibility for overdraft since there are no cheques, and the card generally carries a MasterCard, Visa or other major logo. It may be very difficult, or impossible, to deposit cheques, money orders or any other paper financial instrument into the account, so you’ll need to make any necessary arrangements.
If you need a deposit account, you may not be able to find one that has everything you want, but you can find something that meets your basic requirements.