Keeping a Bank Account


You can continue to operate a normal bank account during your debt management plan. Plenty of functional bank accounts remain available even if your credit rating has fallen. However, in many cases you’ll need to switch to a new bank account before your DMP begins.


This page identifies:


• New banks you should consider using

• Suitable accounts that these banks offer

• The account-opening process for the accounts


Further down the page we also explain:


• The reasons why switching is important

• Some banks you might want to avoid

• Why switching bank accounts has become easier


For advice about starting a DMP (and any connected banking questions) please contact us. Bright Oak is a direct provider of debt management plan services.


Best Bank Accounts


Every bank offers a variety of different bank accounts. Unfortunately entering a debt management plan is likely to result in damage to your credit rating. This means most banks will not want to provide you with an account that provides credit facilities (like an overdraft).


Most banks offer a basic bank account which does not provide credit facilities and which is available to people with imperfect credit scores. Some good basic bank accounts that we suggest you consider are:


1. Nationwide FlexBasic Account

2. The Co-operative Bank Cashminder Account

3. Barclays Basic Current Account


During your debt management plan, you will still have access to important banking features like a contactless debit card and online banking if you use the above accounts. You can also apply for these accounts online rather than by visiting a bank branch. Features that are not usually provided with basic bank accounts include cheque books and overdrafts.


The above bank accounts are also available if you’re planning to enter an IVA, protected trust deed (Scotland), or a debt arrangement scheme (Scotland). At the time of writing each of these banks are also achieving above-average customer service rankings.


Joint Bank Accounts


Both the Nationwide FlexBasic account and the Co-operative Bank Cashminder account are available as joint bank accounts for couples. This might be useful if you’re planning to enter a joint debt management plan or a joint IVA.


Why Switch Bank Accounts?


There’s a risk of real inconvenience and disruption if you continue using a current account with a bank that you owe money to. The potential issues include:


Setting-Off. The act of set-off is where a bank takes money from one of your accounts to pay another. For example, if you don’t pay your credit card then your bank might simply take the money from your current account. This could leave you without the money you need to pay important household bills. This cannot happen if you are using a new bank account with a bank that you don’t owe any money.


Frozen Accounts. A frozen bank account most often occurs when someone enters a personal insolvency process such as an IVA, bankruptcy, or a debt relief order. This could leave you without the ability to pay bills or go shopping. The risk of a frozen account is lower with a debt management plan, but it’s still worth opening a new account with a bank that you don’t owe any money to avoid the risk altogether.


Account Closure. There’s a risk that your account could be suddenly closed if it’s held with a bank that you owe money to and they’re not receiving the full contractual level of repayment. This could leave you without any ability to pay bills or go shopping for several days until the account has been replaced. Once again, you can protect against this by opening a new account with a bank that you don’t owe any money.


Banks with Poor Customer Service


You may wish to avoid banks that are receiving low customer service scores from their customers. The consumer publication Which? releases a regular survey of bank customer service scores. At the time of writing the following banks score poorly for customer service:


• Tesco Bank

• Royal Bank of Scotland


• Santander


We’ve also read feedback that Santander’s basic current account provides a debit card that cannot be used for contactless payments. If this remains true, it’s a potentially major inconvenience for their basic account customers.


How to Switch Bank Accounts


It might take a few days to get a new account opened, so it’s best to start this process promptly once you’ve decided to proceed with a debt management plan.


Switching bank accounts is now quite straightforward thanks to the current account switching guarantee. Most banks participate in this scheme that ensures they’ll work together to switch over your direct debits and standing orders within a week. You’ll just need to arrange for your employer and any benefit or pension providers to make payment into your new bank account.


Get Debt Management Advice


For advice and information about debt management plans and other debt solutions, please contact us. Our experienced advisers provide a confidential, professional, and friendly service to all enquirers.



Author: Andrew Graveson  – Qualified Debt Adviser & Bright Oak’s Founder


Page Last Updated: 11/06/2021



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