Recent times have created great financial hardship for a lot of people. Many have lost their jobs and may have been unable to pay their bills. Not only have they suffered the misfortune of having no money or job, they will also find it hard to get credit in the future because their missed payments will show up on the credit history. When someone with a bad credit rating approaches a bank to open an account, they are often rejected, putting them under further psychological stress, sometimes even resulting in clinical depression and long-term unemployment. Thankfully, their aren’t just reasons for these problems – there now also some formidable solutions.
Reasons for rejection
Let’s face it: These days it is exceedingly difficult to get credit for almost everyone, including the wealthy. If you’re facing debts, it is even more difficult. And the more credit you apply for, the more footprints you will have on your credit report, making it even more difficult in the future. This is because credit reference agencies look at how many times you have been rejected for credit and mark you down for it. They also look at how many payments you have missed and again, mark you down for it. Applying for a bank account may also mean you are rejected, creating another negative on your credit report. Thus, the current system creates an avalanche of rejections for those already in financial difficulties, making it all but impossible for them to ever return to normality again.
A basic bank as an answer
One way to avoid this is to apply for a basic bank account. The term refers to a kind of bank account that offers you a limited set of the most important basic banking facilities. A basic bank account is available to most people, including bankrupts. Although someone who has a fraud conviction may be rejected, most people will qualify for this account as the bank isn’t taking any risks because the customer will not be allowed any credit. As a complement to standard basic bank accounts, some providers have started to offer guaranteed accounts, which offer all but the same facilities as a basic bank account, are managed online and require no credit check in advance. They are literally open to anyone, but tend to charge a small monthly fee. In many ways, guaranteed bank accounts have today established themselves as the basic bank accounts of the 21st century.
With a basic online bank account, you will be able to deposit and withdraw money, access your account and may even be able to set up standing orders or direct debits. Overdrafts are usually not possible, to prevent you from again piling up debt, but other than this, a basic bank account works exactly like a current account and will allow you to receive and send money just like anyone else.
Basic bank accounts and prepaid cards
The other benefit of a basic bank account is that you may be entitled to get a prepaid card. This is excellent news, as it lets you shop without carrying money. It works like a debit card but the difference is you have to preload the card with money before spending it. You can keep an eye on the balance online or there are numbers to call for an update. All of this means that get the convenience of a debit card without its inbuilt dangers of overspending.
Even more importantly, it actually works like a credit card, too, in that it allows you to go shopping online or pay for online gaming – without the disadvantage of having to pay high interest rates. You will soon find that by working with a basic bank account or a guaranteed bank account, you won’t miss your current account at all.
Fees of a basic bank account
So how do banks make any money on a basic bank account? Well there may be a fee, especially for the prepaid card. This could be a monthly fee or a loading fee. Most basic bank accounts are free, though, and are a great option for people who either have no credit history or a poor one.
By getting a basic bank account you can also prove that you are able to manage your finances. Some banks will keep a record of your financial behaviour to pass onto credit reference agencies in the future, which will hopefully mean that you will soon start to be accepted for credit again.