The basic accounts can be given to people with an unstable credit history as they do not offer cheque books or overdrafts.
Those who already have a basic account have previously been hit by charges of £30 and over after a standing order or direct debit has bounced. If the fees are not paid within a certain time period, they escalate.
These fees will be scrapped under the new terms.
According to Andrea Leadsom, the Economic Secretary to the Treasury “It will end people being effectively locked out of their basic bank accounts due to high fees and charges when their payments failed.”
The new accounts will come with a debit card so money can be withdrawn by the UK’s ATM network.
Obstacles encountered by new account holders
Christians Against Poverty (CAP) chief executive Matt Barlow believes there are still some drawbacks.
All of CAP’s debt clients are asked to open a basic account with a bank that they do not owe money to. Often for vulnerable people, this can be a difficult challenge to overcome.
He follows on to say that in some instances, when a client goes into a bank to get a basic account, bank staff on the shop floor try to upsell current accounts as they do not know enough about the basic account and who it’s for. They then carry out a credit check and the customer gets rejected.
Another stumbling block is the fact that banks want photo IDs for the creation of new accounts. This can be far too expensive for people who don’t already own a driving license or passport. There are only two banks that accept alternative types of ID and Christians Against Poverty would like to see the Treasury address this issue.