Bad credit bank accounts

A bank account is essential for receiving a salary, paying direct debits and many other things, but for people with bad credit or those that have been bankrupt, it can be difficult to open one.

If you're one of the many people who cannot open an account, there is an alternative bank account that may be right for you; bad credit bank accounts provide services such as receiving your salary, direct debit payments, a payment card and many of the other services you would expect from a current account.

Where to get one

Below are the providers in the UK, see issuer's website for full details.

Advantages

1. Access
It can be frustrating not having an account when so many of today's financial activities depend on having an account, but this happens to people who've been bankrupt or have very bad credit that they cannot even qualify for a basic bank account. It can also happen if you're a new immigrant to the UK.

With a bad credit bank account applicants are accepted even if they've been affected by the above, allowing you access to the banking services that you need.

Additionally you get a prepaid card that you can use to pay for goods; it works just like debit or credit cards therefore it will be accepted wherever cards are accepted.

2. Easier requirements
Unlike a normal bank account where acceptance depends on a credit check and other requirements, a bad credit bank account has very easy requirements, in most cases there is no credit check carried out when you apply, this makes them ideal bank accounts for bankrupts or other instances of very bad credit.

Disadvantages

1. Cost
The downside to a bad credit account is that you pay for the services on a monthly basis whereas most UK banking customers don't pay for using a current account. The fees are listed in the table above.

2. No high street branches
There are no branches where you can go and use facilities; the account is managed online with telephone support offered. You can use other banks' cash machines for cash withdrawals and in some cases other banks' branches for cash and cheque depositing.

Alternatives

1. Basic bank account
This is a type of bank account that allows you to deposit and withdraw money, but lacks some of the facilities you normally get on a current account. Basic bank accounts are offered by most banks, although not all applicants will be accepted.

The advantage here is that most of these accounts are free to use. The disadvantage is that normally they only come with a cash card, which can only be used to withdraw money from a cash machine; you will not be able to use it to pay for goods.

2. Prepaid cards
If all you need is just a card you can use to pay for goods, then a prepaid card is a good alternative; it is the same type of card that you get with a bad credit bank account but getting just the card means you won't have to pay the account management fee. Learn more about prepaid cards.

3. Credit cards
Another alternative, if you just need a card to use when spending, is a credit card for bad credit; if you qualify, these have the advantage that there are no usage fees or account fees. However, it is important that you have some credit history and are a permanent UK resident.

Conclusion

Bad credit bank accounts are ideal if you really need a bank account and cannot qualify for one with a high street bank, however they should only serve as a temporary solution while you improve your credit rating as they charge you a fee for a service you could get for free.