Bad Credit Current Accounts
The vast majority of us require a current account to help us manage our finances, but if your credit score isn't up to scratch, you could find it a struggle to get one.
If this sounds like a familiar story, it's worth applying for a bad credit current account, designed specifically for those with poor credit ratings.
There are generally two types of account to consider – a basic bank account or a managed bank account.
Basic bank accounts are offered by many of the big high street banks and are free-of-charge. They won’t offer an overdraft or chequebook but will come with a debit card with which you can use to withdraw cash from an ATM and pay for items in stores and online.
But some of these accounts will still require a credit check to be carried out – and if you have a criminal conviction for fraud or are an undischarged bankrupt, you're very likely to be turned away.
Managed bank accounts, on the other hand, are less likely to require a credit check. But, in return, you will usually have to pay an opening fee and/or a monthly fee for operating the account.
Who are bad credit current accounts suitable for?
If your credit rating is fairly low, perhaps because you've missed several bill repayments or been made bankrupt in the past, you could find it hard to get accepted for a standard current account.
But, as bad credit current accounts have more flexible acceptance criteria, you won't be automatically turned down.
However, it’s often the case that banks won't offer you a bad credit current account unless you specifically ask – but by doing this or comparing accounts at MoneySuperMarket, you won't have to miss out.
What do bad credit current accounts offer?
With a bad credit current account, you'll be able to pay your bills and rent or mortgage repayments by direct debit.
Paying by direct debit will ensure you never miss a payment, which, in turn, will help you to build up your credit history. As you do this, you'll increase your chances of being accepted for a more competitive standard current account in the future.
But paying by direct debit also means you could qualify for a cheaper deal on certain household bills. Many energy companies, for example, will offer a discount to customers paying by direct debit.
On top of this, you'll be able to arrange for your salary, benefits and tax credits to be paid into your bad credit current account.
Managed accounts, on the other hand, tend to come with a prepaid card which you must top up with funds in advance. You can then use this card to make purchases as normal, and a number of cards even offer cashback on your spending. In addition, you can use the card for cash withdrawals, but be aware you might have to pay a fee.
What are the disadvantages?
The main drawback to managed bank accounts is that they can be expensive. You could be paying as much as £12.50 to set up the account and a further £12.50 a month for the service charge - plus ATM withdrawal fees on top.
So if you plan to apply for a managed account, be sure to shop around and compare fees carefully – you can do this right here at MoneySuperMarket.
Another drawback to bad credit current accounts is the lack of overdraft facility. However, this isn't necessarily a bad thing as it's easy to become dependent on an overdraft, and not having one can encourage you to manage your finances better. But be aware that if there are insufficient funds in your account when a direct debit is due to go out, you could be charged a fee.
In addition, current accounts for those with poor credit ratings are not competitive. This means you won't earn interest on in-credit balances as you would do with the most competitive standard current accounts.
But, on the plus side, current accounts for those with bad credit scores are a great starting point and as you build up your credit rating, you'll have a greater chance of being accepted for a more competitive standard current account in the future.
You can compare a wide range of bad credit current accounts here at MoneySuperMarket.