If you are struggling with personal debt one of the first steps to getting back in control is often to open a new bank account. This is because you need to make sure that any money paid into your account is fully under your control.
If you continue to use a bank account which is operated by one of your creditors they may take money from your account without your authority. They are allowed to do this under the right of offset.
The problem you face is that if you already have a poor credit rating you may be blocked from opening a new current account. So what can you do? We explain your options.
If you have a poor credit rating ask for a basic account
If you apply for a new current account the first thing the bank will do is carry out a credit check on you. If you have debt problems and have missed payments, your credit rating is likely to be poor and you will fail the check and your application will be refused.
For this reason if you believe that your credit rating is poor you should be up front about this. When you speak to a bank, tell them that you may not pass their standard credit check and so you require a simple bank account with no credit facilities.
This type of account is often known as a basic account or a card cash account. Many high street banks offer a basic bank account facility which they will open for you without needing to pass a standard credit check.
No credit facilities
A basic bank account will allow you to set up standing orders and direct debits. However the downside is that you will not be offered credit facilities such as an overdraft.
Another problem with many basic accounts is that you will not be given a debit card. Some basic bank accounts such as the Co-Op cash minder do offer a debit card facility. However if the bank you have chosen does not, you can consider getting a pre-paid debit card.
Pre-paid debit cards
A pre-paid card operates in exactly the same way as a pay as you go mobile phone. You can only use the card if you have available credit. You increase the credit on the card by paying money into the card account.
Pre-paid cards are very useful for those unable to get a normal debit card. They reduce the need for carrying large amounts of cash and enable you to do your shopping on line.
However, the downside is they can be costly to use as a fee is charged each time money is credited to the card and for cash withdrawals.