Common struggles with opening a bank account

November 3, 2022 • Chris Bardsley

If you have a low credit score and low income, you might have struggled to open a bank account in the past - and you’re not alone. In fact, more than one million people in the UK don’t have a bank account, says Money Saving Expert.

These days, many businesses only accept cards as payment - and there are countless financial opportunities to be gained just from opening a bank account. The good news is that opening an account is easier than you might think, and there are plenty of options available.

In this blog post, we'll look at the different types of bank accounts in the UK and how you can overcome common problems.

Can I open a bank account with a poor credit score?

A poor credit score can make bank accounts a little tricky - but there are still options available. A basic bank account is specifically aimed at low-income individuals with lower credit scores. While you won’t receive an overdraft with this account, you can still use a debit card and standing orders.

What do I need to open a bank account?

If you're looking to open a bank account in the UK, there are a few things you'll need to have:

  • A valid form of ID, such as a passport or driver's licence

  • Proof of address, such as a utility bill or rental agreement

  • A minimum deposit, which varies depending on the bank

Once you have all the necessary documents, you can visit your chosen bank's website or branch to open an account. Opening a bank account in the UK is a straightforward process, and with the right documentation, it can be done quickly and easily.

I have no proof of address. Can I still open an account?

Proof of address includes utility bills, banking statements, insurance documents, tenancy agreements and much more. It can be challenging to open a current account without proof of address. However, if you can’t meet the address verification requirements - you may still be able to open a basic account.

Alternatively, here are a few banks that do not usually require proof of address for current accounts:

  • Revolut

  • Starling Bank

  • Suits Me

  • Cashplus Bank

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What if I don’t have a fixed address?

There are a number of reasons you might not have a fixed address, whether you’re an international student, in sheltered accommodation, or homeless, among others.

Money Facts have a useful page dedicated to helping those experiencing difficulties opening a bank account, click here to find out more. The page provides guidance on the type of information you might need to open an account.

There’s also information on the HSBC website about help provided to people experiencing difficulty with housing and homelessness. By registering with Shelter, or one of their other partner charities, you can access help to sign up for a bank account, with specialist advice at branches across the country.

I already have a bank account. How do I switch to a different bank?

If you’re unhappy with your current bank account, it might be time to switch to a new one. Some people prefer the ‘Jam Jar’ approach with different jars for each section of your budget. Or, you might be looking for a joint account to combine finances with your partner and streamline your budgeting process. Either way, you need to determine what you need from your new account and whether it’s worth switching to a new bank.

Do your research and check out the best bank accounts on the market to make sure you’re getting the most bang for your buck. Fortunately, Money Saving Expert has already compiled a list of the best UK bank accounts right now - and you can receive up to £200 for signing up with some of them.

Switching your bank when you have an overdraft

If you have an overdraft with your current bank, you may be worried about switching to a new bank. However, it is possible to switch your account even if you have an outstanding overdraft balance.

Think Money recommends the following steps:

1. Speak to your new provider to see what overdraft limit they offer and whether they accommodate your circumstances.

2. If they agree, they will do all the hard work for you and switch you to a new account. Just bear in mind you will still owe money to your overdraft.

3. Agree to pay off your overdraft with the bank. They might give you a deadline for when it needs to be paid off, or they might agree on a different way for you to pay it back.

Speak with your bank about your current situation, and make the best decision for your finances.

What are the different types of bank accounts?

Basic bank account

A basic bank account is designed for those with poor credit scores. They are a great place to store money and pay your bills - and they don’t come with overdrafts. So, there’s no risk of running into debt and spending money you don’t have.

Current accounts

A current account is the most popular type of bank account. It’s the bread and butter of accounting. With a UK bank, you can access things like a debit card, direct debits and standing orders - making it easier to manage your money. It can also help you build up a good credit history, which can be important if you ever need to borrow money in the future.

There are a few different types of current accounts available, so it's worth doing some research to find one that best suits your needs. You can usually open an account with a small amount of money, and there are often no monthly fees to pay. If you're not sure which account is right for you, most banks have customer service teams who can give you advice.

Jam Jar budgeting accounts

These current accounts are designed to help with your budget, so you can keep track of what you’re spending and where. Banks, like Monzo and Starling, offer these types of accounts, so you divide your money in different ‘pots’ or ‘jars.’ You can divide your money into different categories for the month and keep track of your various budgets. For example, you might have one pot for groceries and another for all your bills.

Savings accounts

A savings bank account in the UK is a safe place to keep your money. Your money is held by the government, and you earn interest on it. You can use your savings account to save for a house deposit, holiday, emergency fund or even your retirement. The main benefit of having a savings account is that your money is safe, and you can grow it over time. But you can also access your money at any time without penalty.

MoneyHelper recommends starting with small payments into your savings account and slowly building up over time. You could even set up a standing order from your current account to your savings pot each month. Consistency is key.

Joint accounts

A joint bank account is an account that is shared between two people. This can be useful for couples or for friends who want to share finances.

There are some things to keep in mind when opening a joint bank account. First, you should make sure that both parties are aware of all the fees and charges associated with the account. Second, it is important to decide how the money will be divided between the two parties. And finally, you should agree on a spending limit so that both parties are comfortable with the amount of money being spent.

Opening a joint bank account can be a great way to manage finances with another person. Just make sure everyone is on the same page before opening an account so that there are no surprises down the road.

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