As its name suggests, Basic Bank Accounts are a no-frill type of current account. They enable you to receive payments into your account (such as those that are from your employer). It generally offers the following services:
- A cash card (sometimes a debit card)
- Direct debits
- Standing orders
Unlike other current accounts, basic bank accounts typically do not:
- Allow you to go into overdraft
- Charge a monthly fee
Who are basic bank accounts good for?
As basic bank accounts are free and do not let you get into debt with an overdraft, basic bank accounts are proper for:
- Young people who are opening their first current account.
- People who have encountered debt problems in the past.
- People who do not want the temptation of spending more than what they actually earn.
You are not safe from nasty charges though
Even though you can not go into overdraft, this does not mean that you are re safe from nasty charges.
You need to keep track of your expenditures to make sure that your standing orders and direct debits are covered, otherwise, the payment will bounce and you may be charged a fee, not considering other consequences (if, for example, the payment was the minimum payment due on your credit card).
Watch out when you go to take out a basic bank account
Be careful if you want to shift to a basic bank account. Banks and building societies earn less out of these accounts and would very much prefer if you opt for an account where you pay a monthly fee, so stick to your guns and do not be urged to take out an all dancing, all singing current account if it is not what you really want!