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Bank Account With a Poor Credit Record

QUESTION

As a teenager in the mid-80s, he had an account with Barclays but that was closed 10 years ago when he ran up an overdraft of £500-600 (which was never re-paid). Some years ago, I asked the local CAB office for advice and received the names of various banking institutions which would open restricted current accounts for users with poor credit ratings but the approaches my son made were unsuccessful. He has a Post Office Savings Account through which he can process his wage cheques but this takes a long time, causing cash-flow problems, and, in addition, it has no sort code which is required if wages are to be credited direct.

Earlier this year, it was announced that the Post Office was planning to open a bank with limited facilities which I thought would be suitable for my son but the last I heard of this, the main stream banks were threatening to refuse to deal with such a bank which would effectively prevent it operating.

My son is not looking to borrow money, nor to run up unauthorised overdrafts, having learnt his lesson the hard way. He wants a current account with a cheque book and a cash withdrawal card limited to what is currently in his account, and the ability to have his wages credited direct.

ANSWER

A number of high street banks have, or are to, allow bank accounts to be opened by those who have less than favourable credit histories. Whether we believe this to be a push from the government or, the banks formatting a strategy to earn high charges from those who can least afford it, it is a welcome move and a real incentive for many debtors to join the real world.

The account holders will be given cash cards, phone banking and in some cases direct debit facilities. The banks are withholding a chequebook and overdraft facilities until the account holder can upgrade to a full current account. The banks involved are Nat West, Lloyds TSB, with HSBC to follow soon.

I think that your son will have to accept a degree of control over his banking facilities as a way to prove himself, and the announcement by a number of banks offering minimal services is at least a way forward. The following suggestions may not be possible (sizeable deposit), nor may they be totally suitable according to the bank location (small/big branch), but do try to get on as much a personal level as possible, and ensure some form of deposit.

1. Make an appointment with the bank customer service dept when handing in the application form, and talk through his needs.

2. Have the biggest deposit possible at the time of applying for the account. Possibly a cheque from yourself so that it is recognized that he has support and connection with a family etc.

3. Ensure he is on the electoral register.

4. A building society savings account is easy to obtain, and a move to a cheque account after a period can offer a planned approach.

5. If he does apply to one of the banks offering the chance of special account make a point of telling the bank that he is looking for that type of account. I'm not sure if a participating bank will recommend the special accounts or whether you have to make the point.

Of course, your son can marry a woman with a good credit record and apply for a joint account :))