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Published 12 November 2020

What is a Prepaid Bank Account?

Prepaid bank accounts, or no credit check bank accounts, offer a lifeline to those who have been turned down for a regular bank account due to poor credit history. We look at what these accounts offer, alongside the advantages and disadvantages of opening one.

If you need a bank account for any reason but would struggle to be accepted for a regular account due to poor credit history, a prepaid bank account or ‘no credit check’ bank account could be the answer.

Many people don’t realise that a credit check is usually part of the application process for a bank account. If you have a very poor credit rating due to previous bankruptcy, CCJs against you or defaulted payments, you could be turned down for a regular bank account. However, this doesn’t mean that you’re out of options.

Many banks now offer simpler accounts called prepaid accounts, which limit risk to the bank by only giving you access to the cash you have paid into the bank. Although some features of a regular bank account won’t be available to you, like a debit card and an overdraft, you will still be able to pay your salary in, withdraw cash and use your cash card in most shops and online retailers.

Who might need to open a prepaid bank account?

If you have experienced financial difficulties in the past or have declared yourself bankrupt in recent years, you are unlikely to be accepted for a regular bank account. In addition, anyone with County Court Judgments (CCJs) against their name or those who may have eroded their credit record by repeatedly defaulting on credit agreements, may also struggle to open a bank account. In this situation, many feel they are in a vicious circle as having a bank account is all but essential to having a salaried job and doing simple day-to-day things like paying bills and buying items online.

This is where prepaid, or ‘no credit check’ accounts come in. They allow people with very poor credit rating access to these essential functions, but they also help them to manage their money and build up their credit score once more.

What are the main features of a prepaid bank account?

What they do feature:

What they don’t feature:

What are the advantages of opening a prepaid bank account?

Prepaid accounts are essential for many people who have been refused a regular bank account but who need to be able to function normally in day-to-day life by doing things like paying bills, accepting a salary and making online purchases. Some potential advantages of this type of product are:

What are the disadvantages of opening a prepaid bank account?

Although prepaid bank accounts can offer a lifeline to many people with very poor credit ratings, they also usually charge fees. They are also less flexible than regular bank accounts and rarely pay interest on your balance. It’s important to be aware of these disadvantages and to shop around for the best prepaid bank account you can find to suit your individual needs. The most common disadvantages are:

How can I get a prepaid bank account?

Before applying for a prepaid bank account, you’ll need to decide which account provider to go with. To do this it’s worth considering which account offers all the functions you will need while costing you the least. If you are likely to be paying in money several times a month, withdrawing cash regularly and setting up lots of direct debits, you might find that an account with a monthly fee but very few or no transaction charges would be the cheaper option.

Likewise, for someone who is not likely to make many transactions, a no-fee account with transaction charges would be cheaper. Once you have decided which account you would like to open, you can apply online. Although no credit check will take place you will need proof of a permanent UK address and may need to meet minimum age requirements for some accounts.

You will often have your account details within minutes and can start using the account right away.

Reasons you might not be accepted for a prepaid account

About the Author

Caroline Ramsey

Caroline Ramsey is a content creator who specialises in personal finance. More than a decade of working in editorial teams, she offers highly tailored content covering a number of topics.

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