If you have decided that you need a new bank account to use when you start your debt management plan, IVA or bankruptcy you will need to think about a number of things. 

These include which bank to choose, the type of account to open, whether to open your account on line or in person in the branch and how and when to start using the account.

To find out more click on the following links or continue reading below.

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Which bank to choose?

It is very important to understand that if you need a new account because you are trying to deal with a debt problem, then you must ensure that your new account is opened with a bank where you do not currently owe any money.

Opening your new account with an entirely different bank and banking group will ensure that the banking right of offset rules cannot be used.

The table below gives details about which banks are currently owned by other banks in the UK banking world and where the right of offset rule might therefore still apply. Remember, chose a new bank or banking group that you do not currently owe money to:

Bank Name Parent / Owner
Halifax Halifax/Bank of Scotland (Lloyds Banking Group)
Bank of Scotland Halifax/Bank of Scotland (Lloyds Banking Group)
Intelligent Finance (IF) Lloyds Banking Group
Lloyds TSB Lloyds Banking Group
Nat West RBS (Royal Bank of Scotland)
Santander Santander
Alliance & Leicester Santander
HSBC HSBC
First Direct HSBC
Nationwide Nationwide
Smile Co-Op
Co-Op Co-Op
Barclays Barclays

Thinking about starting an IVA?
 
If you are planning to start an IVA, then you should avoid opening your new bank account with HSBC or First Direct. For some reason these banks are against giving bank accounts to people who are in IVAs and will close you account if you start an IVA.

What type of account to open?

If you have a good credit rating
If you have a good credit rating, you will normally be able to open a standard current account. This account will come with a debit card any you will normally be offered credit facilities such as an overdraft or credit card. If you are going to start a debt management solution you should decline these offers.

If you have a poor credit rating
If you have a poor credit rating you will need to choose a bank which offers a simple bank account with no credit facilities commonly known as a card cash account.
 
Most banks now offer card cash accounts (see below). Generally no credit check is carried out and you should be able to open an account in one visit.

In the past, the main problem with a card cash account was that it did not come with a debit card. However this problem has largely now been resolved as many banks now offer their card cash accounts with a debit card which comes as standard.

The banks on the list below provide card cash accounts and should be able to help you:

Barclays – Cash card account
Co-Op – Cash Minder Account
Clydesdale – Ready cash account
Santander - Instant Plus Account
Halifax/BoS – Easy cash Account
Lloyds – Card cash account
NatWest - Step Account
RBS – Key Account

Open the account On-Line or In Branch?

Once you have chosen the bank where you want to open a new account and the type of account you want, you can normally apply on line or go into a local branch in person. You will be asked to complete an application form and then the bank will carry out a credit check on you. As long as you match the bank’s required criteria, they will open your account. It is likely that you will be automatically receive a cheque book and debit card.

If you believe that you have a poor credit history and require a card cash account, then it is normally better to go into a bank in person and explain that you want to open a new simple bank account because you believe you have a poor credit rating. You should specifically ask for a simple card cash account with no lending facilities.

The one exception to this is the Co-Op Cash Minder account which can be opened simply over the telephone.

How and when to start using your new account

Once your new bank account is open, you should start to use it straight away.

You should make sure you speak to your employer and give them your new bank account number so that your wages will start being paid into the new account. You should also change your bank details with any other people who pay money directly into your account such as child benefit, tax credits and any other benefit payments.

It is possible that your employer will not be able to stop your next wage payment from being paid into your old account. If this is the case do not panic. Once the money is paid into your old account, simply draw this out (in cash if necessary) and pay it into your new account.

Draw out exactly the same amount as was paid in by your employer even if this means going into your overdraft facility.

Remember that you also need to make sure that any direct debits you have set up for the living expenses payments that you must continue to pay are set up from your new account.