Millions of bank customers across Britain stand to benefit by hundreds of pounds as nine major banks launch fee-free basic bank accounts from 1 January.
The accounts will be available to anyone who doesn’t already have a bank account, is ineligible for a standard current account or who can’t use their existing account due to financial difficulty.
For the first time they will be truly fee-free, helping people to manage their money without fear of running up an overdraft.
The announcement was made on 27 December 2015 and followed the previous year’s agreement made between the government and the banking industry to establish new basic bank accounts that will end bank charges if a direct debit or standing order fails.
In some cases, charges had been as high as £35 per failed item, and uncapped, meaning charges could accumulate to hundreds of pounds over time and drive people into serious debt.
The changes will remove the risk that basic bank account customers will be forced into overdraft because of these fees and charges.
Basic bank account customers will now also be offered services on the same terms as other personal current accounts that the banks provide, including access to all the standard over-the-counter services at bank branches and at the Post Office, and access to the entire ATM network.
Existing basic bank account customers should ask their bank whether they could still be charged if a direct debit or standing order fails, and whether they are eligible for a new basic bank account.
There are an estimated nine million basic bank accounts in the UK.
Economic Secretary Harriett Baldwin said:
Making sure that everyone in Britain has access to basic banking and financial services is at the heart of our long term plan. That’s why I’m delighted that for the first time, truly fee-free basic bank accounts will be available to anyone who doesn’t already have an account, or isn’t able to use their existing account due to financial difficulty.
This is a key step forward in ensuring that our banking industry works for everyone.
Sian Williams, Head of the Financial Health Exchange at Toynbee Hall, said:
We know from our work with the financially excluded that a transactional bank account is essential for getting and sustaining a job and a home, as well as for accessing opportunities to study and take part in wider society. We therefore fully support the new Basic Bank Account initiative to ensure everyone has access to a bank account.
We particularly welcome the commitment that the poorest and most vulnerable customers will be protected from the account fees and charges which can unintentionally lead to self-exclusion or unmanageable debt.
We are confident that these new accounts will play a significant role in reducing the number of unbanked and underbanked individuals even further, and we look forward to working with the banking sector and HM Treasury to monitor the implementation of the new account standards and to seeing the difference they will make for some of the most vulnerable in our society.
The banks and building societies that have signed up to offer a basic bank account from 1 January 2016 and their corresponding bank account product are:
Barclays – Barclays Basic Current Account
Santander – Basic Current Account
NatWest – Foundation Account
Ulster Bank (Northern Ireland) – Foundation Account
The Royal Bank of Scotland (Scotland) – Foundation Account
RBS England & Wales – Basic Account
HSBC – Basic Bank Account
Nationwide – FlexBasic
Co-operative Bank – Cashminder
Lloyds Banking Group (including Halifax and Bank of Scotland brands) – Basic Account
TSB – Cash Account
National Australia Bank Group (including Yorkshire Bank and Clydesdale brands) – Readycash Account