A free bank account doesn’t charge a monthly or annual fee although you will have to pay to use additional features. The account is normally free of charge to open, but they do sometimes have funding requirements. The basic features of the bank account that you will not be charged for are:
While these bank accounts are free from monthly and annual fees, there are times when you will be charged. These charges will be included in the account’s terms, which you will be informed of when you open the account. The main additional fees you could be charged for include:
When applying for a free bank account, you will also be able to apply for an overdraft. An overdraft is money loaned from the bank that provides you with additional funds for the short term or emergencies. If you go into your account’s overdraft, you will be charged interest, or a flat fee that was outlined in the terms when opening the account. The amount you can borrow in your overdraft depends on how much the bank is willing to lend you and is normally impacted by your credit rating. Most free bank accounts provide the ability to apply to increase, or decrease, your overdraft limit at any time however your application may not be accepted.
If you don’t have enough money in your account at the time a direct debit or standing order is due to go out, and the transaction is rejected, you are likely to be charged a fee. This charge can be as much as £25 for each refused payment but the specific amount will be outlined in your account’s terms.
Free bank accounts provide you with the ability to use debit cards abroad, both to withdraw money from cash machines and pay for products and services with the card. Again, banks will often charge a fee (foreign usage fee, along with a cash withdrawal fee if you withdraw money) to use the debit card abroad. If you are planning to use your debit card abroad, check the charges you will have to pay before leaving so that you are not hit with unexpected fees or, alternatively, consider getting a travel card instead which will be free to use abroad.
While most cash machines are now free to use some convenience cash machines do charge for withdrawing money – These charges are not related to your bank account but rather fees that the ATM company charges, regardless of the type of account. These charges vary but can be as much as £5 per withdrawal. Often convenience cash machines are located in small shops, garage forecourts and in nightclubs.
Some free bank accounts will pay interest rates on the credit you have in your account. If you often have a lot of money in your account, it would be a good idea to look for an account that offers a good interest rate but remember that the rates provided by a free bank account will be lower than that paid to a high interest rate current account (these accounts normally charge a monthly or annual fee).
Some banks now offer a rewards scheme on their free bank accounts. The rewards on offer vary and it is worthwhile to shop around to find the best rewards scheme for your individual needs.
Free bank accounts have a minimum age of 16, or even 18 on some accounts. In order to apply for a free bank account, you will need proof of ID and proof of address. As well as this, you should be aware that banks will run a credit check, so a good credit history is required. Some free bank accounts also require you to make a minimum monthly payment into the account.
If you have a bad credit rating or no credit history you can apply for a basic or guaranteed account which are aimed at those with a poor credit score.
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.