VIDEO- Start by watching this short film that explains why a bank account might be useful, the key types of accounts and credit unions. It contains all the important facts that you need to know in a clear 3 minute video.
IMPORTANT FACTS- Types of bank account
These are all accounts that are used for day-to-day banking.
|Type of Account||Credit check needed||Debit Card||CreditCard||Automated payments (standing orders &Direct Debits)||Overdraft||Monthly Fee||Other features|
|Packaged current||X||X||X||X||X||X||Additional services e.g. insurance|
|Student||X||X||X||X||X||Interest free overdraft, cheap credit, incentives|
|Basic||Dependent on provider||X||Designed for people with very low credit ratings|
|Jamjar (budgeting) account||Dependent on provider||X||X||Particularly for those on Universal Credit|
IMPORTANT FACTS- Jam jar accounts
Relatively new to the market is a jam jar account:
A jam jar account (also called a budgeting account) has been introduced in response to the Universal Credit payment system. The account is divided into different ‘pots’ or ‘jars’, with different sections for bills, spending money etc.
How do they work?
- Money coming into account is split into mini accounts, or ‘jars’.
- Once set up, bills will be paid automatically from the ‘bill jar’; they can be paid on a weekly, monthly, quarterly or annual basis.
- Once bills have been paid, any ‘leftover’ money will be held in a separate ‘spending jar’. This is useful for budgeting because the account holder will only be able to spend money they’ve actually got, and won’t run out of cash for rent and bills because they’ve spent too much on other things. Additional ‘spending jars’ can be opened if one income is being divided amongst multiple people.
There is a monthly fee for jam jar accounts: providers such as Secure Trust Bank, CardOneBanking and the thinkmoneyaccount charge £12.50-£14.50 per month, but several credit unions, such as London Community Credit Union, have or plan to launch much cheaper accounts, typically at £3-5 per month.
To help students to understand how jam jar accounts operate you may find this visualisation helpful.
IMPORTANT FACTS- Where can you open a bank account?
- Bank – usually for profit companies owned by shareholders. They provide a wide range of services.
- Building Societies & Credit Unions – usually owned by the members aka the people who hold accounts there, who will share any profits. Credit Unions are usually only open to those who live in a certain area or share some other common bond. Most Building Societies and Credit Unions offer savings accounts and loans but few offer current accounts.
- Post Office Card Account – Useful for people who don’t have a bank account, the Post Office card account is specifically for receiving benefit, state pensions and tax credit payments.
VIDEO- Watch this video on how to open a bank account
IMPORTANT FACTS- How do you open a bank account?
Once you have decided on the account you want to open, the bank or building society will ask you to fill in a simple application form. Someone at the bank should be able to help you with this if you need them to.
If you’re opening an account with another person or people then each of you will need to complete the application form.
- The bank will tell you first if it’s going to run a credit check to discover your credit history – this will tell them, for example, whether you’ve had problems keeping to loan or other credit repayments in the past.
- By law, all banks must ask you to provide proof of your identity and address, which could mean showing a passport, driving licence or letter from a government department together with a recent utility bill. Most banks will give you a list of the documents they will accept.
- If you don’t have the exact documents the bank asks for, don’t worry – talk to someone at the bank and they will tell you what alternative letters or documents you can provide.
IMPORTANT FACTS– How old do you have to be to open a bank account?
- Most banks will let you open an account in your own name from age 7 but you won’t get all the services. You can open a current account from age 11.
- The age you can get other services such as debit cards, cheque books and direct debits depends on the bank.
- You have to be 18 to borrow money – that includes overdrafts and credit cards.