Have you heard of basic bank accounts? If so, you're one of over half (54%) of adults in the UK who say they have heard of them. Alternatively, you might be one of the 20% who say they actually already have a basic account. This is according to our brand-new research*.
However, if you look a bit deeper, it's clear that many people aren't sure about what basic bank accounts actually are - even if they've heard of them. 76% of the people who said they'd heard of basic accounts defined them incorrectly.
We asked the people who had heard of basic bank accounts: "Which of these statements best describes a basic bank account?" and gave them the following three options to pick from:
1. A free account with no ability to go overdrawn
2. An account with a monthly fee
3. An account that is free when you're in credit, but charges if you go overdrawn
What actually is a basic bank account?
If you chose option 3 above, you correctly defined a basic bank account - however, only about a quarter (24%) of people in our research chose this option. The majority (72%) chose option 1, while 4% chose option 2.
Basic bank accounts are provided by all high-street banks, although they're not commonly advertised. They are available to people with poor credit histories, and usually come with the following features:
- No charges while you're in credit
- A place to keep your income from your job, benefits and other sources
- A debit or cash card that you can use in shops, online and to withdraw cash
- The facility to set up Direct Debits and standing orders
However, they commonly do not have certain facilities, such as a chequebook or overdraft. Importantly, although they don't provide authorised overdrafts, many basic accounts won't prevent you from entering an overdraft unauthorised. That means that if you accidentally slip into your overdraft, you may incur charges. For example, one leading high-street provider would charge £25 every time you slip into the unauthorised overdraft on your basic account - which could become extremely costly.
Are there any other options?
Basic bank accounts can work very well if you manage to stay out of the unauthorised overdraft.
However, if you don't think a basic bank account is suitable for you, there are other options available.
For example, the thinkmoney Personal Account doesn't run a credit check, so it's available to people with any kind of credit history, as long as they're 18+ and a UK resident. It's even open to undischarged bankrupts - while many basic accounts are not.
It does charge a monthly fee, but you are unable to go overdrawn, so you won't be charged for going into an overdraft, or for any returned payments. For this fee, you also benefit from a built-in budgeting service that manages your money for you, helping you ensure there's enough money put aside for bills - as long as you're putting enough in, of course!
* Consumer Intelligence research carried out a survey of a representative sample of 2,202 UK adults from 31st July - 05th August 2013.