There are so many different types of bank accounts out there that it can be tricky to work out which bank account is right for you. With everything from basic bank accounts to cash only accounts and prepaid bank accounts, without a guide to tell you exactly which bank account provides which benefits, it’s difficult to know exactly which account you need. Read on for our guide to basic bank accounts.
Basic Bank Account
Basic bank accounts were originally set up to enable those with poor credit histories and those who are less well off to have access to bank accounts and day-t0-day banking facilities. Basic accounts were set up for those who were unable to get a “normal” bank account due to having a poor credit history or no credit history at all.
Benefits of a basic bank account:
- Allow you to pay in your wages, benefits, credits and pension
- Allow you to set up standing orders, direct debits and direct payments in order to pay your bills
- Allow you to spend money using a cash card
The difference between a basic bank account and normal bank account is that you’re unable to have an overdraft facility or a chequebook. This is useful for people who are worried about overspending, as you are unable to go overdrawn and so you don’t have to worry about being able to pay back the overdraft. However, if you fail to make a bill payment or if you don’t have enough money in your account to pay a bill, a charge will be put onto your account. If you fail to pay the charge within a set number of days, you’ll accrue more charges.
Cash Card Only Account
Cash card accounts allow you to pay money into an account, through your wages, benefits, credits and pension. However, with most cash card accounts, you are unable to set up standing orders or direct debits. You can make one time only payments from these accounts but you are unable to set up direct debits as the bank will see you as a risk. The bank may well expect you to default on your payments and so they do not allow you to set up a direct debit in order to prevent you from accruing charges. You are also able to use the card to withdraw money from cash machines and to make payments in shops and online. Your card will be rejected if you do not have the money available in your account.
Prepaid Bank Account
Prepaid bank accounts are becoming more and more popular – but they’re not actually bank accounts. Prepaid bank accounts are actually prepaid cards that you pay your wages into (you can also top them up with money at certain stores and cash machines). You can then pay your bills from the account. Again, bills can only be paid from the account if there is enough money in the account to pay them. If you don’t have enough money on the card to pay your bills, you’ll be charged, and if you don’t have enough money in store or online, your card will be rejected.
Basic bank accounts can be very useful, especially if you have a low credit score. Contact your bank to find out more.