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

It's hard to imagine life without a current account, but this is the stark reality for thousands of Brits. We look at what alternatives are out there if you can't get a bank account.

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What accounts could you get?

If you have been turned down for the bank account you applied for, you still have several options:

  • A different current account, as banks have different eligibility rules, meaning you could get accepted elsewhere. Avoid applying for too many accounts because this could damage your credit record.

  • A basic bank account, which has most of the same features as a normal current account apart from an overdraft. They are easier to get because banks do not need to check your credit record when you apply for a basic account.

  • A prepaid card, which you could use like a bank account to pay for things, withdraw cash or pay your bills by direct debit or standing order.

  • A credit union is a community-run financial provider that could 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 basic of banking services. It can be used to pay your wages, cheques or cash into and can also be used to pay bills and direct debits.

Unlike a current account most basic bank accounts do not offer overdraft facilities or cheque books.

Most basic bank accounts do not require you to pay in an opening balance or charge any fees for usage. However, you should be aware that they can charge hefty fees for any unauthorised use. They are likely to cap any overdraft buffer they offer at £10 and will refuse payments that would take you over this limit (and may charge you a 'returned payment' fee).

The features, benefits and application criteria they specify will vary from provider to provider, so it is a good idea to compare them in order 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. The only things likely to get your application for a prepaid card turned down are a lack of a stable address or if you are lacking proof of identity.

You can have your wages credited directly onto most pre-paid cards and then can 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 on your person.

Most 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.

Some prepaid cards will allow you to build a credit rating through responsible use.

Credit Unions

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

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

They are usually only available to people living in a certain area or working in a certain industry. This means you have to meet their strict application criteria in order to be eligible for a current account. Some credit unions will 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 then it is always best to deal with them, rather than exhausting all other options in the pursuit of gaining more credit.

Get free, impartial advice from someone that you can trust. There are a number of charities that offer financial advice; you can read our guide to find out more.

As well as being independent and impartial, their 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 rating stops you getting access to credit, there are a number of similar steps you can take to improve your credit rating.

  • Get on the electoral roll. If you're not on it then it's unlikely you will get any credit as your bank or building society won't be able to verify your identity.

  • Pay your bills on time.

  • Space out your credit applications as too many in a short space of time make you look desperate and could affect your score.

  • Build yourself a good credit history. It can repair a tarnished reputation or build a brand new one if you have never had one before.

  • A partner's poor rating could also affect you. If you've separated then write to credit agencies disassociating yourself from your ex.

  • Go for stability. A homeowner is better than renting and employed is better than self-employed. Give a landline number on an application form rather than mobile. The longer you've been with employer or at an address the better as well.

Why would you be refused a bank account?

If you are refused a bank account the first step is to understand why. This will help you to decipher what went wrong and to choose the right financial solution going forward:

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

  • Insufficient ID - if the account provider cannot verify who you are, they will not 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 - a number of 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.

  • Undischarged bankruptcy - this can make getting a standard current account impossible until it is cleared.

  • Defaulted payments - these can impact your credit history and make you seem less attractive.

  • History of fraud - this will severely impact your ability to get approved for a current account.

Why do you need one?

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 a blemished 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.

New bank accounts are offered all the time, so compare all of the best options to make sure you get the right one for you.