Basic bank accounts offer consumers free day-to-day banking and aim to give everyone access to banking facilities. They were originally introduced as a result of a government scheme to support financial inclusion, helping less well-off families and those who have problems opening a normal bank current account owing to a poor credit score or no credit history.
A basic bank account is also a good alternative to explore if you can't meet the standard verification requirements on a standard current account, or have experienced difficulties trying to open a current account in the past.
Basic bank accounts allow you to pay in your wages, benefits, tax credits and state pension. They give you a cash card to withdraw your money and some offer standing orders and direct debits. However, unlike normal bank accounts, they do not give you a cheque book or overdraft facility.
Basic bank accounts also appeal to people who are worried about overspending, as they do not allow you to go overdrawn. You can only spend the balance of your account; however, you still need to keep an eye on your funds to cover any standing orders or direct debits. If there is not enough money in your account to pay these, they will be rejected and you will be charged.
Prepaid accounts are an alternative to a traditional bank account and a relatively new way to manage your money. With certain prepaid account cards for everyday use, there is no need for a bank account as they allow your wages to be paid onto your card and allow you to top up via BACS or with cash at a PayPoint or Post Office branch.
Some prepaid bank cards also allow you to pay all your household bills online using their bill payment tools and keep a track of your budget and manage your expenses 24 hours a day.
If you are new to the UK and are finding it difficult to open a bank account, a prepaid card may be just what you need!
Find out more about opening a bank account without proof of address.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.