How to rescue your finances if you've been refused a bank account

Being rejected for a bank account can be a worry, but the good news is there are still options open to you. Discover what you need to know.

Why do you need a bank account?

You need a bank account to:

• Receive your wages, state benefits or pension payments

• Pay your bills by direct debit – many companies charge more if you pay another way

If you have an imperfect financial past and are finding it difficult to get accepted for a current account, it can feel like you're running out of options. But there are alternatives.

What can you do if your application for a bank account is rejected?

If you have been turned down for a bank account, there are several options you can consider instead. These include:

• Applying for a different current account. Each bank has different eligibility rules, meaning you may be able to get an account elsewhere. However, you should avoid applying for too many accounts in a short space of time because this could damage your credit record

• Getting a basic bank account. These have most of the same features as a normal current account apart from a chequebook and overdraft. They are easier to get because banks don’t need to check your credit record when you apply for a basic account

• Considering a prepaid card. These can be used like a bank account to pay for items, withdraw cash or pay your bills

• Talking to a credit union. Credit unions are community-run financial providers that can offer you a simple current account if you live or work in the local area

Basic bank accounts

A basic bank account only offers you the most rudimentary banking services. You can have your wages, cheques or cash paid into the account, and you can also use it to pay bills and direct debits.

Unlike a current account, most basic bank accounts do not offer overdraft facilities or chequebooks.

In addition, most basic bank accounts do not require you to pay in an opening balance or charge any fees for usage. However, there will still be fees for some things, such as overseas and foreign currency payments and cash withdrawals, and CHAPS payments. 

The features, benefits and application criteria will vary from provider to provider, so it is a good idea to compare them to find the one that's right for you.

Prepaid cards

Prepaid cards operate on the same basis as a basic bank account in that they do not offer you access to credit.

This means that they are suitable for those with a poor credit history as, unlike applying for a credit card, you won't be credit checked when you apply. However, you could still be turned down if you don’t have a fixed address or proof of identity.

You can have your wages credited directly to most prepaid cards, and you can then use them to pay bills or make purchases as you would a debit or credit card.

This means you can take advantage of the benefits of shopping online and avoid the drawbacks of carrying large amounts of cash around.

However, many prepaid cards will charge you when you top up or spend on the card, which can make them an expensive alternative. For this reason, you should think about how you need to use the card and compare the features and charges accordingly before you apply.

Credit unions

Credit unions are community-based versions of building societies, and some offer current account facilities to their customers.

Like basic bank accounts, these accounts usually enable you to make direct debit payments and set up standing orders. Some offer debit cards with their accounts, but many offer cash cards instead. Again, cheque and overdraft facilities aren't usually provided.

Note that credit union accounts are usually only available to people living in certain areas or working in certain industries. This means you will need to meet their strict application criteria to be eligible for a current account. Some credit unions charge their account holders a monthly fee.

Find your local credit union here

What other options are there?

Free debt advice

If you are struggling with significant debts, it’s better to deal with them head on as soon as possible rather than pursuing more credit.

Get free, impartial advice from someone you can trust. Several charities offer financial advice – read our guide to find out more.

As well as being independent and impartial, this advice can help you deal with your debt problems in simple steps, such as drawing up a budget and prioritising your debts.

Improve your credit rating

If your credit score is preventing you from getting a bank account, there are a number of steps you can take to improve your credit rating. For example:

• Getting on the electoral roll. If you're not on it, it may be harder to get credit as your bank or building society won't be able to verify your identity easily

• Paying your bills on time

• Spacing out your credit applications by three to six months. Too many applications in a short space of time can make it look like you’re in financial difficulty and could affect your score

• Using a credit card. Some cards are specifically designed for those with poor credit scores and, as long as you use them sensibly, they can help you rebuild your credit score  

• Writing to credit agencies to disassociate yourself from your ex once you’ve separated – a former partner's poor rating could also drag your score down

• Demonstrating stability – from a credit score point of view, owning a home is better than renting, being employed is better than being self-employed (and the longer you've been with an employer or at a particular address, the better) and a landline number on an application form is better than a mobile one

Why could you be refused a bank account?

If you are refused a bank account, it’s important to understand why. This will help you to choose the right financial solution going forward. The reasons could include:

• Having no credit history or a poor one: your credit rating is usually checked when you apply for a current account

• Supplying insufficient ID: if the account provider can’t verify who you are, they won’t give you an account

• Being on a low salary: many standard current accounts specify a minimum monthly income, so check the application criteria before you apply

• Being too young: some standard current accounts specify a minimum age, so check the application criteria before you apply

• Having too large an overdraft: the account provider may not want you to transfer your debt

• Having an undischarged bankruptcy: this can make getting a standard current account impossible until it is cleared

• Defaulting on payments: this can impact your credit history and make you seem less attractive

• Having a history of fraud: this will severely impact your ability to get approved for a current account