FOUR million customers are now using fee-free basic bank accounts, following a government initiative to help Brits with bad credit scores.
The UK’s nine biggest retail banks are providing the no-frills, no-overdraft accounts, which mean consumers who might have been unable to get a standard bank account are no longer blocked out of the banking system. The basic bank accounts mean they are not at risk of running up overdraft fees or other bank charges.
Basic bank accounts come with a debit card and offer a range of standard transactions, such as direct debits. In the case of a failed payment, the customer will not be charged a penalty fee.
Read more: Unsecured consumer credit hits all-time high
Lloyds and Nationwide have opened the most new basic bank accounts in the first half of 2016 and Lloyds accounts for almost half of the basic bank account market. The other banks participating in the scheme are Barclays, Clydesdale and Yorkshire Bank, Co-operative Bank, HSBC, RBS (including the NatWest and Ulster Bank brands), Santander and TSB.
Read more: Nearly half of Brits face savings shortfall
Basic bank accounts have been available for around a decade, but a 2014 government agreement that firmed up the framework came into force on 1 January 2016.
“Ensuring consumers have access to the financial services they need is a vital part of our plan to build an economy that works for everyone,” said Simon Kirby, economic secretary to the Treasury.
“That is why I am delighted nearly half a million people have opened fee-free Basic Bank Accounts since January.
“There is still more to be done and I am determined to work with the industry to boost financial inclusion and make sure people have the resources they need to manage their finances.”