Life without a bank account
Our 2014 Quids In! Reader Survey indicated a shocking decline in the use of banks by social tenants. Demonstrating a new trend among the so-called ‘under-banked’, the 85% in 2012 who had a bank account, became 48% who were using them in 2014.
This financial exclusion comes at a time when the Government wants benefits to be paid direct into a bank account. The days of mums popping to the post office to collect child benefit in cash are over. Even the famous 'Giro' is old tech. Financial institutions, including banks and credit unions are developing basic bank accounts and payment alternatives, but many people who are used to operating on a weekly basis are not comfortable managing a monthly payment into their account. In Benefits Street, neighbours entrusted their rent money to White Dee*, who made sure it didn't get spent before the rent was due. For those without a Dee in their street, another option is a jam jar account, but these may charge a fee. So once again, those without money have to pay more.
*White Dee is cover star of the Spring edition of Quids in! magazine
Why don't people use banks?
Six reasons to be unbanked
This story on the US site BankRate.com has plenty of relevance in the UK. For example: the unbanked and underbanked are more likely to fall victim to the high-rate (predatory) side of the industry, such as payday, account-advance, tax refund-advance and structured, settlement-advance loans. A 'second chance' bank account sounds like a good idea. Click here
Could you live without a bank?
This Mirror story from 2008 shows how people's faith in the banks was shaken by the financial crash. Click here. Has that confidence and trust been rebuilt yet?
The end of free banking
Free banking will disappear within a decade according to Transact, the National Forum for Financial Inclusion. In fact, some argue that 'free' banking is a myth, because customers pay through higher overdraft charges, penalty fees, and uncompetitive or zero rates of interest on credit balances. Click here to read more.
Advantages and disadvantages of pre-payment cards
Money Facts looks at the pros and cons of getting a prepayment card that can be used like a debit card, but without the risk of going overdrawn. Click here Of course using any sort of card may be a challenge to digitally excluded people who are not comfortable with the technology and cannot bank online.
* One example of the new breed of prepayment cards is offered by Ffrees. The organisation charges small, transparent fees, but acceptance is guaranteed, whatever the applicant's financial history. See more
The Post Office card
Little blue post office savings books are so last century, the eccount allows clients to load a prepaid debit card with cash at the post office, and card holders can earn cashback as they spend. The eccount allows account holders to set up and pay standing orders at no extra cost, for example to pay their rent. There is a monthly fee of £12.50, however, and a charge of 50p for using an ATM. Acceptance is guaranteed, but proof of ID may be required. Read more
Financial Exclusion in the private rented sector
Eight per cent of tenants living in privately rented accommodation are financially excluded, according to a report by the Personal Finance Research Centre (PFRC) at the University of Bristol and Sliced Bread Consulting. Being without a bank account significantly reduces the pool of properties available to these tenants, because it puts the use of letting agents and landlords who require payment by direct debit, completely out of reach. Read on
The Guardian looks at the challenges of creating affordable and secure ways of banking in the developing world. Solutions found abroad may well reach the UK, including banking by phone. Click here for more.
Case study: Sarah tries to get a bank account
Sarah is trying to escape her controlling husband. She is staying with relatives, but does not feel mentally strong enough to go through a divorce. She has a debit card, but her husband has online access and can spy on her movements if she uses it, So, in January 2015, she plucked up courage to walk into a bank with a member of the Quids In! team. She was turned down by Lloyds and HSBC advisors and an online chat advisor for Nat West (even though she has a NatWest account) because she could not show ID or proof of address. They stated that this was because of fraud regulations. She found the experience embarrassing because she was being asked personal questions immediately and in front of other members of the public, and depressing when she was turned down. It was particularly depressing for us that the advisors showed no sign of training to spot a vulnerable person and no one offered her somewhere quiet to talk, or any advice. Sarah has decided she will stick to cash.
Who can help?
Click on the image to download a comprehensive directory of schemes set up to help people struggling to pay their bills. Organised by region and supplier it is produced by Auriga.
Quids In! magazine regularly gives advice about basic bank accounts, credit unions, budgeting and money skills. Click here
Money Advice Service has a series of online features to help people choose the right bank account and use different services. Read more
Find a Credit Union close to your clients' home; transport may be an issue for them. Click here
Money Skills gives a long list of options for someone struggling to provide proof of address acceptable to a bank. Click here
CAB Financial Skills for Life training includes choosing and using a bank account. Click here
BILD offers money skills training for people with learning difficulties, including managing a bank account. Click here
Barclays Money Skills offers a peer project to train young people about banking and financial skills. Click here