It is likely that you will have to change your bank account before starting a Debt Management Plan. If so you need to decide which bank to approach and the type of account to apply for.

• Do you need a new bank Account for a DMP?
• Which Bank should you choose?
• What type of account should you open?
• When should you start using your new account?

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Do you need a new Bank Account if you are starting a Debt Management Plan?

If you are starting a Debt Management Plan (DMP) you will need to think about your bank account. If any of the debts you are going to include are owed to your current bank you will need to open a new account.

This is because of the banking Set Off rule. The rule means that if any of your debts with the bank get into arrears they can take money from your account to pay these without warning.

If it happens you could be left with insufficient cash to pay your living expenses or your agreed Plan. The only way to protect against this is to open a new account with a different bank.

If you do not owe your bank money or you do not plan to include debt owed to them in your DMP you should be able to continue using your bank account.

Which Bank should you choose?

If you have decided to open a new bank account you now need to think about where to open it. The only restriction is the bank must be unrelated to any of the debts you are going to include in your DMP.

By choosing an unrelated bank you ensure that any income deposited into the new account is always protected from the Set Off rule.

Set off applies between banks in the same Banking Group. When choosing a new bank make sure you pick one which is not in the same Group as others you owe money to.

Table 1 below shows which banks are members of which Banking Groups.

Table 1: Banking Groups in the UK

What type of account should you open?

After you have picked the bank where you want to open a new account you now need to decide the type of account to apply for. There are two options. Either a current account or a basic account.

If you have a good credit rating there is nothing to stop you applying for a normal current account. You can check the status of your credit rating by getting a copy of your Credit File.

Where you have already started to miss debt payments your credit rating is likely to be poor. In these circumstances you will need to apply for a basic account. You will not be offered any type of credit facility with this account.

When applying for your new account you do not need to mention you are starting a DMP. If asked why you are applying for a basic account just explain that you know your credit rating is poor.

The banks on the list below are known by Beat My Debt to provide basic accounts and should be able to help you:

• Barclays – Basic Account
• Co-Op – Cash Minder
• Yorkshire Bank – Ready Cash
• Clydesdale – Ready Cash
• Santander – Instant Plus
• Halifax/BoS – Easy Cash
• Nationwide – Flex Basic
• Lloyds – Card cash
• NatWest – Step Account
• RBS – Key account
• Virgin – Essential Account

When should you start using your new Account?

It is best to open your new account well in advance of starting your Debt Management Plan. Start using it as soon as it is open. You can then ensure it is operating correctly before your Plan starts.

Remember to change your bank details with your employer and anyone else from whom you receive money. Also make sure that any direct debits you have set up are changed to the new account.

If your employer is unable to stop your next wage payment from being paid into your old account do not worry. Once the money is paid simply transfer it to the new account. You can draw it in cash if necessary.

If you need to transfer your wages from your old account to your new do not be afraid of drawing out the same amount as was paid in by your employer. If this means going into your old overdraft the debt can be included in your DMP.