What is a bad credit bank account?

5 April2011

Bad credit bank accounts are, as the name suggests, bank accounts that are open to people with a bad credit history.

Also called `basic bank accounts`, they were introduced under a Government scheme to help people who wouldn`t otherwise have been eligible for `normal` financial products gain access to products suited to their situation.

They offer, as Directgov states, a `convenient place to keep money you need for everyday use`.

Why were they introduced, and why do we need them now?

Bad credit bank accounts were introduced to help everyone gain access to banking products - specifically people on lower incomes, or those who have had problems opening a `normal` bank account because of their credit history.

Although there are plenty of other bank accounts available, they won`t be open to everyone, so bad credit bank accounts have an important part to play - particularly at a time like now.

Why now?

After the recent recession, plenty of people will be struggling to obtain financial products because of a poor credit rating.

Bad credit bank accounts are available to just about anyone, but they can be particularly useful for people who`ve been turned down when applying for other accounts and/or haven`t had any banking experience in the past in this country.

So, if you`ve had your application for a bank account turned down, you may be advised to look into a bank account for bad credit. Alternatively, if you`ve already got a bank account, and have recently experienced serious difficulties managing your finances, you may need to move to a bad credit bank account.

What do you get with a bad credit bank account?

Most bad credit bank accounts will offer the basic banking features you`d expect with an account - such as:

  • A place to store your money (wages, benefits, tax credits, etc.)
  • A cash card you can use to withdraw cash and make purchases
  • Standing order/Direct Debit facilities

The thinkbanking account offers all of this and much more - including a personalised budgeting service designed to make sure every financial commitment you`ve told us about is met every month, and an online banking service so you can manage your money from the comfort of your own home.

Note: bad credit bank accounts don`t tend to offer facilities such as a cheque book or overdrafts. For people who worry about overspending, this can actually be quite a good thing.

Will a bad credit bank account affect my ability to open a current account in the future?

Before they approve any application you make, financial companies need to see that offering you their services wouldn`t be too risky. So, providing you can show your bank that you`re able to manage the money in your bad credit bank account effectively, they may well let you `upgrade` to a current account in the future.

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