One of the most common forms of debt in the UK is the overdraft. An overdraft is when your bank allows you to spend more than you actually have in your account. Many banks allow you to spend thousands of pounds more than is actually in your account, meaning that, realistically, once you are into your overdraft you will never be able to repay it.
Why Switch Bank Accounts?
If you are in debt to your bank through an overdraft or credit card, then they are legally able to take the payment from your account without permission. This is called, the right to set off. The right of set off allows your bank or other financial institution to take money automatically out of your current account to pay off other debts you may have with them, e.g. credit card or overdraft. This is why we may advise you to change bank accounts if you are struggling to repay your bank. This protects your money and ensures you are in complete control of your finances.
Current Account Switch Service
There are currently more than 40 bank and building societies that have subscribed to the Current Account Switch Guarantee. This provides some basic services for you when transferring your account to a new one. These services include:
- Transfer money from your old account into your new account
- Close your old account (if you want)
- Move all of your current direct debits and standing orders to your new account
- Tell your employer to move your payments to your new account
- Have your new account open in seven working days
On top of these services, for 36 months after switching, your old account provider must arrange for any incorrectly made payments to be redirected toy our new account. The sender will then be informed of your new account details.
Types of Bank Account
There are many different types of bank account and you can get any that you want. Different bank accounts have different benefits and you must work out which is the correct one for you.
Basic Bank Account
The basic bank account is, as the name suggests, very basic. You get an account where you can pay in or out of, and a debit card. That’s it. There is usually no overdraft facility. The basic bank account is open to most people, and no matter what your financial troubles are, you should be able to open a basic account somewhere. This is the type of account we suggest, as if you are struggling with debts, you don’t need all of the optional extras; you need to be able to get your income paid into your account, and pay your bills out. That’s it.
A current account is the standard bank account type, however, you may not be able to open one if your have bad credit. When you open a current account you will get a cheque book to make payments, and usually a debit card to use in shops and cash machines. You will be able to create standing orders and direct debits. Depending on your financial situation, you could overdraft and loans made available to you.
Post Office Account
If you can’t get any form of bank or building society account, then a Post Office account is for you. A Post Office account is the most basic of all bank accounts. You can only use a Post Office bank to receive:
- State Pension
- Tax credits
You can’t pay anything else into the account. You can only access your money from Post Office branches, and you certainly won’t get an overdraft. If you want to open a Post Office card account you must first contact:
- The DWP if you get a benefit or State Pension
- HMRC if you get tax credits