What is Basic Bank Account?

Full Definition

A basic bank account is a simplified current account designed for people who are unable to open, or do not want, a standard current account, most often because of a poor credit history, no credit history at all (such as recent arrivals to the UK or young adults), or a past bankruptcy or debt problem. Under a agreement between the government and the UK's largest banks, the nine largest current account providers are required to offer a basic bank account, free of any monthly fee, to any eligible customer who does not already hold one, and basic account applications cannot usually be declined purely on credit-score grounds in the way a standard account application can. Basic bank accounts typically come with a debit card, allow direct debits and standing orders to be set up (making them useful for receiving wages or benefits and paying household bills), and support cash withdrawals and everyday branch or app banking, but critically do not offer an overdraft facility of any kind, arranged or unarranged, meaning a payment that would take the balance below zero is simply declined or bounced rather than incurring an overdraft charge, which protects vulnerable customers from spiralling unarranged overdraft debt. Because they are designed as an accessible entry point rather than a full-service account, basic bank accounts are commonly used as a stepping stone: a customer who manages a basic account well and rebuilds their credit history over time may later qualify for a standard current account with an overdraft and other features. Basic bank accounts are also central to tackling financial exclusion, since without a bank account of some kind, receiving wages or benefits, paying bills by direct debit, and building any kind of financial track record all become significantly harder.

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