Whatever happened to basic bank accounts?

While banks are promoting current accounts with interest and cash-back deals - and the new fast switching service has encouraged more than 600,000 to change accounts in the past six months - numbers of people without a bank account are rising.

New figures, from Ffrees Family Finance, are suggesting that more than three million British adults do not have a bank account – double previous estimates by the Treasury’s Financial Inclusion Taskforce.

It can be hard to qualify for one of the shiny new current accounts, but most banks offer a basic bank account with no overdraft and no cheque book, so there is no credit facility.

The problem is, they don’t promote them – and have been known to hide them from people who could most benefit from this kind of account.

Debt Advice Foundation Chief Executive David Rodger said: “Typically, we find that someone who is on a very tight budget will ask for a basic bank account but will be persuaded instead to apply for one of the new current accounts will lots of bells and whistles.  If they are then turned down for this account – which often happens - they then assume that all banks will turn them down.

“Without a bank account, you can’t pay for bills via direct debits – usually the cheapest way to pay.  Without a debit card, you can’t use a cash machine or shop online – where the cheapest deals can often be found.  It’s much harder to arrange to receive benefits, and of course makes you much more vulnerable to crime if you are only ever receiving cash.

“Most people who are struggling with debts just need a simple current account so they can pay in all their income and set up direct debts to make regular payments on their bills.  Not having a bank account puts people outside the mainstream, isolates them financially and dramatically increases the risk that they are going to get into financial difficulties.

“It’s a reflection on our banks that, for all the advertising we see, so many people don’t have a current account.”

For more on the Ffrees Family Finance story, click here

For more on the switching story, click here