Basic bank accounts – What you should know
You may be looking into a basic bank account as a reassurance that you won't go overdrawn; or perhaps you are currently only eligible for a bank account with no credit facilities.Whatever the reason, this article looks at both the advantages and disadvantages of holding a basic bank account, and provides a summary of why they may be suitable for your banking needs.
The advantages of a basic bank account
Most of the features of a standard current account can be found in the offerings of High Street basic bank accounts. This type of account will still allow you to pay your utilities and bills by direct debit, ensuring that you don't miss out on those all important savings offered when you pay by direct debit rather than in cash or cheque.
Similarly you are also able to pay in any wages, benefits or other automated credits, and you'll be able to access your money with you bank card through an ATM.
If you don't qualify for a standard account currently, by using a basic bank account responsibly, you can build up your credit rating, with the aim of being eligible for a standard account in the future.
The drawbacks of a basic bank account
The reason such an account is known as basic is because, primarily, that you are not allowed an overdraft facility. Furthermore, because they are not seen as accounts for banking institutions to try to gain, they are less competitive;this means that you most likely won't receive any interest on your money, if you receive any at all.
In short, basic bank accounts are basic because they are functional, and nothing more.
Alternatives to a basic bank account
First and foremost, it may be worthwhile checking whether you are eligible for a standard bank account. Do not presume that because of a bad credit history, or because you have been refused at one banking institution for an account, that you must have a basic bank account.
If you are unable to open a standard bank account, there are alternatives such as managed card accounts, which are online based. These will give you the freedom of having a card that you can use to make electronic payments.
Whilst there are certainly advantages to holding a basic bank account, there are also draw backs for those that are either used to a more flexible way of running their finances, or that are used to the convenience of card payments and other banking features.
That said however, for those that do only require basic banking services, basic bank accounts are more than sufficient, particularly as there are options out there that will allow you to pay your bills, rather than just withdraw money.
The information on this page is designed to help you understand more and make more informed choices. We do not receive any commissions, instead we are funded from companies that we advertise on our website.