Basic Bank Accounts
Although personal banking in Britain is more widely available than ever before, with 94% of people having at least one account they can use, there remain nearly 3 million adults who are completely outside the banking system.
Basic Bank Accounts, also known as starter accounts or introductory accounts, are a kind of simple bank account which was introduced a few years ago to make it possible, in theory, for anyone to open an account.
The main reason that people don't have an account is that they have a bad credit rating, and can't get past the credit scoring systems of high street banks. Basic accounts sidestep this by not offering any way for customers to get into debt - no overdrafts, cheques or debit cards - so making the accounts virtually risk-free for the banks.
This means that nearly everyone who applies will be accepted, and since 1st March 2005 the Banking Code has included a commitment to giving an account everyone who wants one. The only real exceptions are undischarged bankrupts, people who have a history of fraud, people who can't prove their identity, and those with very serious cases of bad debt.
Why Have They Been Introduced?
These accounts have already been a success, with around 5 million people already using them, but both the government and the banking industry are committed to increasing the number further - ideally, until every adult in the UK has a bank account of one kind or another.
This is for three main reasons:
- The government is steadily moving towards paying all benefits, pensions and tax credits direct into people's accounts rather than with the old payment book or giro system, saving money in the process. Obviously, everyone needs access to an account for this to work.
- Without a bank account, people find it very difficult to make use of other financial services. Opening a basic account can be a stepping stone towards a more fully-featured account, and is part of a move towards full 'financial inclusion', where everyone in the country has access to financial advice and services.
- The cost to business is less if all employees can be paid by money transfer rather than in cash.
But what do basic accounts offer, and how do they differ from a normal account?
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