A range of new, totally fee-free basic bank accounts have been launched by nine banks and building societies in the UK, promising to charge nothing for any missed payments.
Basic bank accounts are designed for those whose credit rating does not permit them to qualify for standard current accounts and as such, tend to come with various restrictions. Basic bank accounts rarely offer overdraft facilities, for example, nor do they tend to come with cheque books.
These particular accounts are no different, they offer no overdraft services but they do come with a debit card to be used online or in stores.
Until now (or rather, until January 1st when these accounts are officially released) any time a basic bank account holder missed a payment, they would face a penalty charge of up to around £35. This would, rather often, send the account holder into an unauthorised overdraft, incurring yet more penalty fees and fuelling a vicious cycle.
Partly because of this exact issue, an investigation was conducted into the banking sector with a particular focus on basic bank accounts in order to work out whether best practise, with the interest of the account holder taken into account, was being followed. The aim was to establish whether or not there was anything that could be done to prevent those whose financial situation was already bad enough to force them to open a basic account from being made even worse off as a result.
What resulted was an agreement made between the banking industry and the treasury for the former to offer fee-free accounts that would give those who are worst off something of a safeguard to prevent their situation becoming intractable.
The nine high street banks who are now to offer these no-fee basic bank accounts are: RBS, Lloyds Banking Group, Santander, TSB, HSBC, Barclays, Nationwide Building Society, NatWest and the Co-operative Bank.
The changes will mean the end of late or missed payment fees for the nine million people in the UK who currently hold basic bank accounts and it is hoped that they will encourage some of the two million without an account at all to sign up.
Anthony Browne, CEO of the British Banking Association, said that he hopes that these new accounts and changes to the market will mean that “more people than ever before can now access banking services.”
The Financial Inclusion Commission published a study in March of this year reporting on those without bank accounts and claimed that not having an account can mean that an individual finds themselves paying up to £1,300 more than one who does have a bank account every year for basic financial services.
As such, a lot of the progress that the banking industry is currently undergoing has the ostensible aim of increasing account membership to tackle issues like this.
Mr Browne said that: “these basic bank accounts build on the significant progress made by the industry on financial inclusion in recent years.”