Do you need a bank account?

Content owner : Last updated : 25/09/2014

Universal Credit & bank accounts

A number of benefits that are currently paid separately, including Housing Benefit, are being brought together into a single payment called Universal Credit. This will work differently from the benefits it replaces:

  • You'll be expected to make your claim online
  • Most people will be paid once a month direct to their bank account
  • You'll have to start paying rent yourself
  • You'll get a single payment for your houselhold

To help us all prepare for Universal Credit, we now ask our tenants who are not on full housing benefit to pay their rent by direct debit. This is so that you do not fall behind with your payments and helps keep our processing costs low. But even if you currently do not pay rent yourself, you will in the future - so you will need a bank account that allows direct debits.

The following information outlines some of the different options.

Different types of accounts

  1. Current accounts
  2. Most people use a current account with a bank or building society to manage their day-to-day money. It allows you to:

    • Pay bills by Direct Debit or standing order
    • Receive automated payments such as salary, wages or benefits
    • Pay for things with a debit card and withdraw money from cashpoint machines
    • Have access to an overdraft, although this will need to be authorised by the bank
  3. Basic bank accounts
  4. These are often used as a stepping stone to a current account. A basic bank account doesn't normally have an overdraft facility but does allow you to:

    • Pay bills by Direct Debit or standing order
    • Receive payments such as salary, wages or benefits

    A basic bank account may be right for you if:

    • You have a poor credit record or you're on a low income
    • You don't need the extra things that a current account offers, for example an overdraft facility
  5. Jam jar accounts
  6. These accounts are sometimes called budgeting accounts or rent accounts and are designed to help you budget. They let you divide your money into different 'pots' or 'jars'. You decide how much money goes into each pot by working out how much you need for your bills and how much is left over for spending or saving.

    They also allow you to:

    • Pay bills by Direct Debit or standing order
    • Receive payments such as salary, wages or benefits

    One disadvantage of these accounts is that they charge a monthly fee.

    A jam jar account might be right for you if:

    • You want an account that helps you to budget
    • You want to avoid charges for refused Direct Debits

Fees, charges and overdraft costs

  • Fees can vary a lot between banks and between accounts, with one of the highest fees being charged for going over your agreed overdraft limit.
  • If you regularly spend more than you have in your account, choose one which will give you an overdraft up to an agreed limit without charging feed and/or with a low interest rate.

Bank facilities

Do you like dealing with a person in a branch or would you prefer the convenience of telephone or Internet banking?

  • Not all banks provide phone, internet, mobile banking, postal and branch services so make sure you will be able to bank how you want to.
  • If you like going into a branch, choosing a bank you can easily get to will be the most important factor.
  • Make sure there's a cashpoint machine that you can use free of charge near where you live or work. Otherwise you might be charged between 75p and 10 for withdrawing money.

More Information

You can get more information about available account options from any bank, building society or credit union. The independent Money Advice Service website also has lots of helpful information, including specific information for people on Universal Credit who need a bank account -