THE QUIDS IN! BANKING GUIDE
Here is our brief guide to the basics for sorting out your banking options. At the bottom of the page there are some links to further information if you want to read more on a certain topic.
What Did The Banks Ever Do For Us?
Good question, but there is a lot of pressure on banks to give a better deal to people on lower incomes. Love them or loathe them, we’re going to need them:
- Benefits – The new benefits system for working age people, Universal Credit, will only pay into a bank (or credit union) account. As UC includes all benefits from Child Tax Credits to Housing Benefit, it’s worth having two accounts – one to keep money for rent and bills safe and one for day-to-day expenses (See our page on Universal Credit)
- Direct Debits – Energy firms already reward customers who pay by Direct Debit with lower charges. We have to ensure there’s enough in the bank to cover the bill but it’s one less thing to worry about. Landlords are likely to follow a similar route with Standing Orders, which are like Direct Debits but are for fixed amounts so you know where you are
- Over the phone – We can check our bank balance, make payments and check transactions by calling up the bank. You can also pay for goods, services and products, as well as make deposits, via text message. The cost of the purchase is added to the monthly phone bill or deducted from a prepaid balance by the mobile phone operator. Charities often use this system as a way to get people to donate.
- Online Banking – Almost everything is now paid online, from wages to benefit payments. People who check their accounts online, using a computer or their mobile, are overdrawn less often
- Online shopping – Searching for bargains on the internet without leaving the armchair can mean cheaper shopping and this usually requires a debit or credit card (See Spending)
- Savings – Having a savings account will pay you interest, but it pays to shop around. (See Savings)
- Fee-free Basic Bank Accounts – The idea behind this scheme is everyone has a right to a bank account. People on low incomes, whatever their credit history, should be able to access one because BBAs do not allow us to get into debt. You just need some basic ID.
What are the alternatives?
- Building Societies – As ‘mutuals’, they are owned by those who have accounts with them. As they are run for the benefit of customers, not shareholders, they try to beat the banks on high interest for savers and low interest for borrowers
- Credit Unions – These are usually local and much smaller, but similar to building societies. They often specialise in encouraging local people to save so they can later access short-term loans where mainstream lenders would either turn them down or charge huge fees
- Pre-Payment Cards – Prepaid cards let you add cash on to them before spending them in shops or online. They can be used like a bank account if you can’t get or don’t want one. They usually carry fees but could prove cheaper than going overdrawn or falling into arrears with rent and bills
- Jam Jar Accounts – Some accounts, often run by Credit Unions, come with a jam jar function where we can tuck away money for rent and other bills. We spend the rest but money for important outgoings is safe
- Post Office – This is wholly owned by the Government and offers a limited range of accounts and services, which may be useful to those who still don’t trust the banks, especially around savings. It does not offer good enough services to receive Universal Credit
Money Advice Service (MAS) has a series of online features to help people choose the right bank account and use different services.
To find out how Basic Bank Accounts work and if you are entitled to one, click here.
Citizens Advice Bureau’s Financial Skills for Life training includes choosing and using a bank account.
Practical Money Skills gives a long list of options for anyone struggling to provide proof of address acceptable to a bank.