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Confusion reigns about basic bank accounts

28th August 2013 Print

Although just over half (54%) of people in the UK say they've heard of basic bank accounts, confusion reigns about what they actually are. New research from Personal Account provider thinkmoney shows that 76% of people who've heard of basic accounts define them incorrectly.
Basic bank accounts are available to people with poor credit histories (some are even available to undischarged bankrupts) and are free if you are in credit. They are provided by all high street banks but are not commonly advertised.  Although authorised overdrafts are not usually available, most accounts do not protect you from entering an unauthorised overdraft - which you may be charged for - along with charges for any returned payments. For example, one basic account from a high street provider charges customers £25 for each returned payment. 
We asked the 54% of people who'd heard of basic accounts "Which of these statements best describes a basic bank account?" and presented them with three options:

1. A free account with no ability to go overdrawn
2. An account with a monthly fee
3. An account that's free if you're 'in credit' but charges if you go overdrawn
Only a quarter (24%) chose the correct option - the third one. The majority (72%) said basic bank accounts were free accounts with no overdraft (option 1). 4% thought it was an account with a monthly fee (option 2).
What's more, 20% surveyed said they had a basic account, but official figures suggest that some of them may be mistaken. Figures from the Office of Fair Trading suggest that 12% of the current account market was made up of basic bank accounts. This suggests that around 8% of these respondents may have said they had a basic bank account without fully knowing what one is.
Ian Williams of thinkmoney said: "People with poor credit ratings may think their options are very limited - especially if they have a basic account that regularly charges them.
"However, there are alternatives to basic bank accounts available. For example, the thinkmoney Personal Account is not a basic bank account - but it is available to people with poor credit histories, including undischarged bankrupts. It charges a monthly fee but does not allow you to go overdrawn - so there are no overdraft charges and no charges for returned payments either. On top if this, the account provides a built-in, personalised budgeting service help you get manage your money better and ensure that all your bills are paid.