Bank Accounts

Bank Accounts
Following the recent changes to the welfare system now may be an ideal time to consider opening a new bank account. With the introduction of Universal Credit imminent, those residents who are in receipt of housing benefit will receive their housing costs directly and will need to pay their rent in full to us. There are a number of different bank accounts available:
Basic Bank Account
A basic bank account is the simplest type of bank account. They have been designed for people who want limited functions, for example, an overdraft because they don’t want one or can’t have one. They can be useful if you have a low credit score, need a way to receive benefit payments or just want to control your spending.
You need to be at least 16 to open a basic bank account, although at some banks the minimum age is 18.
What do basic bank accounts offer?
Basic bank accounts are very simple, so they don’t provide a cheque book or overdraft.
With most accounts, you can:
• have wages, salary, benefits, pensions and tax credits paid straight into your account
• pay cheques in for free (as long as they’re not in foreign currency) – you’ll be able to spend the money once the cheque clears
• get money out at Post Offices and cash machines (you may be charged a fee by the cash machine operator)
• pay your bills by Direct Debit or standing order, and
• use bank counters to pay money in, take it out or check your account balance.
• some accounts will also give you a debit card.
For more information on basic bank accounts and which banks offer them, click here.
Current Accounts
A current account has more services than basic bank account. You will usually have to pass a credit check before being offered a current account.
With a current account you can:
• receive payments directly into your account
• pay cheques into your account
• withdraw cash and check your balance at a cash machine and Post Offices
• set up Direct Debits and standing orders to pay your bills and
• apply for an overdraft allowing you to spend an agreed amount more than you have in your account – although you may be charged for this facility
• You can access most current accounts through a high street branch, online, using mobile banking or over the phone.
You need to be over 16 to open a current account, although for some banks the minimum age is 18. If you are under 18 you may be able to open a current account with your parents’ help. Banks may ask you to pay a minimum amount into your account every month, usually from wages, benefits or a pension.
How much does it cost?
As long as you have money in your account, you do not usually have to pay for account services, although packaged accounts include charges
An overdraft
An agreed overdraft is a way of borrowing money from the bank through your current account, allowing you to spend more than you may have in your account. Banks may charge you interest or a fixed amount for lending this money; the interest is often at a higher rate than a personal loan. However, some offer interest free overdrafts.
Banks can charge higher fees if:
• you spend more than you have in your account without arranging an overdraft, or
• you go over the agreed overdraft limit
Some current accounts offer more services, usually for a monthly fee. These are usually referred to as packaged account, see below for more details.
For m ore information regarding current accounts, click here.

Packaged Bank Accounts
Most banks offer a wide range of accounts, from no-frills current accounts to packaged accounts that offer a range of extras in exchange for a monthly fee.
The benefits vary by account, but you can often get:
• commission-free foreign currency
• travel insurance
• motor breakdown cover
• mobile phone insurance
• ID fraud insurance
• a discounted – or interest free – overdraft, or
• preferential rates on other financial products
What to watch out for
• The cost of the account may be higher than the cost of buying the benefits separately.
• The insurance you get may be pretty basic – it might not give you the level of cover you need.
• You may not need all the benefits attached to the account.
• You will usually have to pass a credit check before being offered a packaged bank account
Packaged accounts are a good deal for some, but not all. If you’re thinking of getting one, ask yourself:
• How many of the extras do I really need?
• Does the insurance give me the right amount of cover?
• Could I get the services separately for less?
• If the account gives me an interest-free overdraft, am I currently paying overdraft fees and charges higher than the cost of the packaged account?
For more information on packaged accounts, click here

Choosing a bank account
Things you might want to check before choosing what type of account to open and with which bank or building society.
• check you can use cash machines near your home or work for free – ask the bank or building society if you’re not sure
• find out if there’s a local branch where you can pay in money and check your account
• make sure it offers the services you need, such as a debit card, Direct Debits or standing orders, and
• check if there’s a buffer zone that lets you take out a small amount like £10, even when your account balance is lower so you can still get money using a cash machine.
When applying for a basic bank account, ask the bank if they plan to carry out a full credit check rather than an enquiry. If so, they should let you know and explain how this might affect your future credit rating.
For more information on choosing a bank account, click here.
Opening an a New Bank Account
Once you’ve decided on the account you want to open, the bank or building society will ask you to fill in a simple application form. Someone at the bank should be able to help you with this if you need them to.

Credit and identify checks
The bank will tell you first if it’s going to run a credit check to discover your credit history - this will tell them, for example, whether you’ve had problems keeping to loan or other credit repayments in the past.
By law, all banks must ask you to provide proof of your identity and address, which could mean showing a passport, driving licence or letter from a government department together with a recent utility bill. Most will provide you with lists of documents that give these proofs.
If you don’t have the exact documents the bank asks for, don’t worry – talk to someone at the bank and they will tell you what alternative letters or documents you can provide.
For more information on opening a bank account click here.
Once your account is open, look for cash machines that are free to use rather than paying to take out your money. Checking your balance regularly will help you to make sure there’s enough money in your account to cover any standing orders or Direct Debits – so you don’t pay charges for having them rejected.