Eu Directive: Basic Account Availability
Under the terms of a 2014 European Union directive, all EU member states must ensure that people have access to a basic payment account by 2016, allowing them to receive money and to pay bills.
The UK government worked with the major banks to meet the terms of the directive and in December 2014 announced that a deal had been arranged with nine of them, accounting for 90% of the UK current account market.
Features of the agreed-upon basic bank account template – which should now be available from participating providers – include:
- No one-off fees for rejected direct debit or standing order payments
- Debit cards offered, allowing access to the ATM network
- Access to bank counter services
- No overdrafts
- No cheque books
- Basic accounts to be marketed alongside a provider’s other accounts
The EU stipulation on fees for basic accounts was that they must be ‘fair’, but the UK government pushed for them to be fee-free as part of their crackdown on the payday lending industry which has attracted customers who couldn’t get access to more mainstream banking options.
According to EU figures, in 2014 there were around 58 million EU consumers over the age of 15 without access to a payment account.
“We are making a real difference to the lives of millions of EU citizens by giving them access to a basic bank account so they can easily receive a salary or pay their electricity bill, for example,” said EU commissioner Michel Barnier.
How Do I Find A Basic Bank Account
Although many current account providers offer basic bank accounts, not so many promote them, and some may even actively put hurdles in the way of customers finding them.
Generally speaking, banks would prefer you to take out one of their standard products.
This may, for example, give the provider more opportunity to make money from fees on things such as overdrafts.
If you compare current accounts through Gocompare.com, our best-buy table will automatically display all the products we have available, but you’ll see that you can filter this to just show basic bank account options.
You can then compare the basic products that are available, looking at things such as whether annual fees are charged, qualification restrictions, daily ATM limits, features and how you can access your account.
Do Banks Check Credit Reports To Open New Accounts
While opening a new account does not usually involve any kind of credit, customers credit profiles are still able to impact their ability to receive a loan. This is because some of the credit unions and banks will check credit reports as part of their application procedures.
In most cases, this kind of credit check does not stop you from opening a bank account. You dont necessarily have to worry about getting a no-credit-check bank account. However, this credit check can still influence the kinds of accounts you are eligible for. Yet again, some red flags, such as charge-offs or bankruptcy with previous financial institutions may also negatively influence your options. Thankfully, this kind of credit check is not a hard pull, but a soft credit pull. In other words, applying for a new bank account should not have an impact on your credit scores.
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Reduce The Amount Of Debt You Owe To Improve Bad Credit
The balance of your debt related to your available credit contributes 30% to a FICO Scores calculation. This is referred to as utilization. Using less of your available credit can actually raise credit scores. Here are a few tips to keep in mind.
- Keep balances low on credit cards and other revolving credit: Outstanding debt will negatively impact a credit score. Experts suggest using 30% or less of your available credit limit. For even better credit scores, using 10% or less of available credit is what people with excellent credit scores practice.
- Pay off debt: Paying down credit card debt is one of the most effective ways to improve your credit scores. Check out tips to get out of debt to save thousands.
- Never close unused credit cards. Credit scoring models reward you for having a long credit history as well as for using only a small portion of your available credit limit. Keep unused credit cards open so that you benefit from a longer average credit history and a larger amount of available credit.
- Dont open several new credit cards you dont need: If your credit report reflects nothing but negative account, then adding positive credit accounts will help rebuild your credit history. But if you dont need new credit to help your score, keep to a minimum.
Check out what other factors make up a credit score.
Banks That Offer Second
Smaller banks and federal credit unions can offer second-chance checking accounts. There are also several larger lenders that provide the service, as well, including:
If you find yourself barred from a traditional bank account, try opening up a second-chance account with any of these financial institutions.
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What Are Checking Accounts For Bad Credit
Banks are quick to deny people with poor credit from getting a checking account.
While some institutions judge people harshly based on their credit history, others are more understanding and have specifically created checking accounts for bad credit.
Though these accounts may come with some fees and limitations, they waive the credit checks banks usually put applicants through.
In most cases, they offer the tools you need to successfully manage your finances, such as debit cards, ATM access, mobile deposits, and online banking.
At any rate, theyre far more beneficial than relying on prepaid cards and cashiers checks.
Additional Perks Offered By Many Online Banks
These banks are competing for your business, so they offer a lot of great perks. The following list highlights a few.
Card Security and Control
Many of these banks offer the ability to freeze your card along with virtual cards. These tools help prevent fraud. You can freeze your debit card so it canât be used with a simple tap in the mobile app. It may be a good idea to keep your card frozen all the time and just unfreeze it when youâre using it. This can pose a problem with subscriptions, though. You can address this by paying subscriptions with a separate account thatâs used just for that purpose. Itâs easy to do this when thereâs no fee for your account and itâs easy to transfer money between accounts. Some accounts offer subscription monitoring services, too.
Virtual cards are separate from your physical card. Virtual cards only exist in cyberspace. They have a number and expiration date just like your physical card. If you suspect fraud on the virtual card, you can change the number with a quick call to the bank instead of waiting a couple of weeks to get a new physical card. You may want to use your virtual card for all internet transactions and virtual wallet transactions. With the widespread use of contactless payment, itâs rare to need a physical card.
Other Common Perks of the Online-Only Accounts
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Options Apart From Basic Bank Accounts
If you have a history of fraud, or if you’ve been made bankrupt and your bankruptcy hasn’t been discharged yet, your options will be more limited.
Hardly any high street banks and building societies offer accounts to people in such circumstances, but you might want to look into some of the options below.
If you’re struggling to find an account online, try speaking to providers in person or on the phone.
Such institutions have a reputation for being more understanding and supportive of those in financial difficulties – because they’re not-for-profit institutions their purpose is intended to be to serve their members.
Many credit unions offer bank accounts, although you may have to commit to keeping in credit to a certain level and/or to paying a fee. Such fees are typically lower than those associated with fee-paying current accounts.
Fee-paying current accounts
While paying a fee for a current account is typically associated with premium accounts that offer additional services, it also works at the other end of the scale.
Basic Bank Accounts Have Little Or No Fees
A basic bank account does not charge you to operate your account or for services such as direct debits or standing orders. Many also do not charge for failed payments, but you do need to still manage your account carefully as it is possible the bank could close it if they believed it was being misused.
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Basic Bank Accounts For Those With Credit Problems
Basic bank accounts are similar to normal current accounts, but there will be certain restrictions and limitations.
There’ll be no overdraft facility, there’s unlikely to be in-credit interest, and some products will also deny access to debit cards and cheque books.
It will be possible to carry out basic banking functions such as setting up direct debits and standing orders, but you obviously need to ensure you have the funds to meet such outgoings.
If not, you’re likely to be hit by fees and to risk falling deeper into financial difficulty.
Ways To Resolve Chexsystems Issues
Even if your bank doesnt use ChexSystems, your free report can alert you to the types of information that may be hindering your application.
Fortunately, because ChexSystems and other CRAs track only your banking history, that does not impact your credit score. You can have a great ChexSystems score and a bad credit score. The reverse is true as well.
Depending on which of the issues your CRA report lists, you may be able to resolve them in one of these ways:
- Submit a dispute. If you believe any information on your ChexSystems report is wrong, you can file a dispute directly on the ChexSystems website. ChexSystems states on that website that it usually completes investigations within 30 days.
- Pay the bank. If you owe money because of overdraft fees, overdrawn accounts or anything else, you can contact that bank, ask to pay your debt and then ask the bank to remove the item from your ChexSystems report.
- Wait. Most ChexSystems records fall off your report after five years. If youre already close to the five-year mark, you could have a clean report soon.
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Look For Banks That Dont Charge Monthly Fees
If your credit is already in trouble, having to pay additional monthly fees likely wont help you recover from the difficulties you may be having paying off your current loans.
You work hard for your money, and therefore you should spend it when and how you want to. Porte doesnt charge monthly fees.2 We believe your money should stay in your pocket.
You Can Open A Checking Account With Bad Credit
Lets start with the good news. Having a poor credit score will not prevent you from opening a bank account.
Your credit score is taken from information on your credit reports, documents that track your history as a borrower, and are compiled by the three major credit bureaus: Experian TransUnion and Equifax. The most common type of credit score is the FICO score, which is scored on a scale of 300 to 850. The higher your score, the better your credit.
Your FICO score is, indeed, used by traditional lending institutions like banks and other personal lenders to determine whether or not to lend to you, but it isnt used when you apply for a checking or savings account.
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How Can I Get A Basic Bank Account With Bad Credit
Almost anyone can get a basic bank account, and different banks have their own application processes. Some will let you apply online, while others might need you to pop into a branch. In order to open one, youll need a form of ID, such as your passport or photographic driving licence, and proof of where you live like a utility bill or benefit book.
Because a basic bank account doesnt give you an overdraft, it isnt a credit product. This means you shouldnt need to pass a credit check to open an account. However, some providers will still want to run a check anyway, so make sure you check this before applying, as it would appear on your credit report.
Can I Open A Bank Account Online With No Deposit
Many traditional banks will require you to put down a deposit in order to open an account. Luckily, there are now many companies and banks that will let you skip this step.
One good option would be to find a credit union. A credit union is similar to a bank but typically they have better rates and offers. Credit unions usually only allow people to join based on certain criteria. You may be able to join one based on where you live, or based on your job, or if you have a family member thats a member of one.
In addition to credit unions and certain banks, there are now many online lenders/banks that allow borrowers to open bank accounts with no deposit. Simply do a search for online bank account with no deposit and see what you can find.
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What Are The Pros And Cons Of Second Chance Checking
Second chance checking accounts usually have monthly fees that can’t be waived, and they often carry more requirements than standard checking accounts, such as setting up direct deposit or completing a money management class. You typically can’t enroll in an overdraft program, since the point of a second chance account is to demonstrate that you can avoid overdrawing.
These checking accounts can help improve banking history, but they don’t rebuild credit. For that, consider a secured credit card.
Despite their limitations, second chance checking accounts often beat alternatives, such as prepaid debit cards or check-cashing services.
Despite their limitations, second chance checking accounts often beat alternatives, such as prepaid debit cards or check-cashing services. These can come with costly transaction fees and balance requirements, and may also lack convenient features like online banking.
If you can avoid negative balances or fees, many second chance checking accounts let you upgrade to a regular checking within six months to a year.
» Want to explore another option? Check out our roundup of the best prepaid debit cards
Does Having A Bank Account Help Improve Your Credit Score
Having a bank account can help improve your creditworthiness if used correctly. A bank account is like a paper trail of your financial choices, so if you can build up a history of regularly adding money to savings accounts and demonstrating good financial habits over a period of at least six months, this can help improve your bank’s opinion of you.
Although your non-credit bank account transactions will not appear in your credit history, and so wont affect your credit score, they could still come into consideration by a bank when you next apply for a credit card or loan.
Apart from running your bank account properly, there are several things you can do to improve you credit score.
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Form A Limited Liability Company
Businesses operating as sole proprietorships may find it beneficial to file as a limited liability company in order to separate the owner from the business. Here are some benefits to forming an LLC:
- You will receive an employer identification number .
- You can separate your personal and business credit. For example, your personal credit will not be affected if your business is unable to repay a loan.
- Protecting your companys credit will ensure that the business is not penalized for any one partners personal financial choices.
Have A Look At These Last
Cash-only lifestyles are hard to manage and could cost a lot.
According to research conducted by the FDIC, most Americans do not have any issues with credit or bank debt. A few of them might be tempted to take advantage of risky businesses, like cashing checks or payday loans that charge excessive charges.
It is crucial to establish bank accounts at the traditional bank. If youre unable to open a second-chance or regular charge, you could look into other alternatives to banking as a last option. Theyre not as secure as traditional bank accounts. However, theyre faster than paying a substantial amount of your profit in withdrawal charges.
- Debit cards that have an unpaid balance. They can be used to transfer and receive cash and perform online transactions, and then return them. The cards are also able to buy items in the individual. They typically cost per transaction.
- Its a kind of pre-paid credit card. They charge high rates of interest instead of transaction charges. You can transfer or deposit money and pay transaction fees.
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Benefits Of A Checking Account With Bad Credit
An online checking account can open so many doors, and its all but essential in todays economy.
As more and more retailers and service providers move online, the need for an online account grows ever more important.
Without a bank account, paying bills can be a challenge, as can making deposits and transferring funds.
You might also have a difficult time getting approved for an auto loan or a mortgage, which can severely impact your future.
In addition to its essential functions, a bank account adds convenience to your life.
It streamlines simple tasks and allows you to easily track and manage your budget. Even if you have bad credit, a checking account is well worth pursuing.
How Bad Credit Can Lead To No Bank Account
The same is true for banks when youre opening a checking account. If they see you as too big a risk, they arent going to let you open an account. As attorney Carmen Dellutri, founder of Dellutri Law Group, puts it, Banks dont like to take risks, period.
The only difference is that the bank wont check your credit score or pull a copy of your credit report from one of the three major bureaus. Instead, they will run a bank-specific version of a credit check, using a slightly different system to evaluate your creditworthiness. Rather than look at your history of borrowing money, the bank looks at your history of, you guessed it, using bank accounts.
They will most often run the check through a company called ChexSystems. If you have made mistakes with banks in the past, you might have been put on the ChexSystems list, says Dellutri. Those mistakes could include a closed bank account without paying fees, bad credit, or other banking mistakes. Additionally, an overdrawn bank account that is never paid up will end up being sent to a collections agencywhich will show up on both your normal credit report and your ChexSystems report.
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