The UK treasury has revealed a new deal with major banks for fee-free basic bank accounts. These are aimed at helping thousands of people with poor credit history, who are often unable to open a regular current account.
The UK deal is in place ahead of EU legislation set for 2016, when a European directive will require all EU nations to provide basic bank accounts for citizens. At present almost 1 million people in Britain and approximately 58 million people in the EU do not have access to a bank account. The chief executive of Citizens Advice stated that “some people [are] shut out of the banking system altogether because they can’t get a basic bank account.”
Basic Bank Accounts and Fair Fees
Not all of today’s most basic and simple bank accounts are free of charge – there are often late payment fees, as high as £30 plus interest. Limited access to cash machines, lack of debit cards or direct debit options are also common problems for current basic bank account holders. However, this new move by the UK treasury will give people with limited access to bank accounts a chance to take control of their finances.
These basic bank accounts will include features which will help people manage their finances and budget better, and the EU directive will ensure fairer fees for account holders. Current one-off late-payment fees, which occur if a payment, direct debit or standing order has bounced due to insufficient funds, will also be scrapped under the new rules.
The UK’s four major banks, Barclays, Lloyds Banking Grouyp, HSBC and Royal Bank of Scotland are (amongst others) expected to offer this basic bank account – which will not be available with an overdraft or cheque book – in the near future.
Change is Still Needed
According to debt charities, there is still a way to go in the battle against poverty. For example, many people have trouble opening a bank account, as banks usually need photo identification. This is an expensive luxury, which many people cannot afford: a new passport costs approximately £80.