If you don't know what a basic bank account is, you're not alone. Recent research by thinkmoney, shows that nearly half (46%) of people in the UK don't know what they are.
Even the people who said they'd heard of basic bank accounts weren't exactly sure what one was. We asked them how they'd define a basic bank account and gave them three options:
1) A free account with no ability to go overdrawn
2) An account that's free if you're 'in credit' but charges if you go overdrawn
3) An account with a monthly fee
So what's the real definition?
The correct definition is the second one - but only about a quarter (24%) of people chose it. The majority (72%) chose the first option, while 4% chose the third.
The 72% were nearly right - a basic bank account is a free account that doesn't usually come with an authorised overdraft facility. Basic bank accounts are open to people with poor credit ratings. However, the crucial difference is that you can usually go overdrawn without authorisation on a basic account - and if you do, you'll probably be charged for it, plus further charges for returned payments. For example, some high street basic bank account providers charge £25 for every returned payment.
Basic bank accounts don't usually come with a chequebook either, but in all other respects they're quite similar to 'normal' bank accounts. It's a place to keep your money, set up Direct Debits and Standing Orders, and usually comes with a cash or debit card that you can use to spend in-store, online, or withdraw cash.
How many people have basic bank accounts?
20% of the people we asked said that they already have a basic bank account. However, considering the confusion that surrounds basic accounts, some of them might have been mistaken. A report from the Office of Fair Trading said that between 2007 and 2011, 12% of the current account market was made up of basic accounts - which means that around 8% of our respondents may have incorrectly defined their own bank account.
Are there any other options?
If a basic bank account doesn't seem right for you - perhaps because of the charges, or you can't get one (like if you're an undischarged bankrupt) - there are other options available.
For example, thinkmoney provides an account that is an alternative to a basic bank account. It is open to everyone: whatever their credit rating. It's even available to undischarged bankrupts. It charges one transparent fee each month, and you can't go into your overdraft - which means no overdraft fees and no charges for returned payments.
It also comes with a built-in budgeting service that is overseen by our Money Managers. They set up your account so that important money for bills is held back (to ensure they get paid) and the rest of the money goes to you, to use how you wish. That way, you can relax - knowing that your money is being managed properly.