Consolidate Your Debts in Minutes

The Right to Offset - Why you should avoid debts with your Bank.

If you have unsettled debts with your bank, then your bank is entitled to take money from you – no matter whether or not you can afford it.

In fact, having debts with your bank is a less than enviable situation. Consider the following:

  1. You are having problems making loan and other credit repayments
  2. One or more of these debts is with your current bank (or one of its partners)
  3. Your wages are paid in to the same bank account.

 

In such a situation, the bank will simply take whatever wages are owed them, regardless of your other commitments. This is called the “Right to Offset.” What this means is that the bank will take whatever money is currently in your account – without your permission – in order to bring the loan and credit card payments up to date. This is completely legal, unfortunately.

Why you need a new bank account.

In the event that you owe money to a bank that your wages are also directly paid to, then you are not able to negotiate a reduced affordable repayment schedule, since all creditors have to be treated equally. In the event that one of your creditors is able to take whatever payments are due to them immediately, then this puts them at an advantage over the others.

Thus, if you enter in to a debt management program or an IVA, it is essential that you open a new bank account in order to have a safe haven for your money. Then you are back in control of your finances once again.

Bank Charges

Until fairly recently, banks were permitted to charge whatever fees they wanted for overdrawn accounts, bounced checks, etc. It is, however, now considered illegal for anyone to “fine” you in such a fashion. Thus, banks are only allowed to apply charges that are reflective of their own costs.

Basic Bank Accounts

According to the law, all banks must offer a basic account. Such an event allows you to use the basic banking facilities without going in to debt.

It is thus better to open a basic bank account, rather than a current one. With a basic bank account, it is impossible for you to get in to further debt, as you do not have any credit facilities with this account. What is more, no matter how bad your credit is, they cannot refuse you when opening up a basic bank account.

Below, you will find some of the main features of basic bank accounts:

  1. You can receive money and pay bills, although you are typically not allowed to overdraw by more than ten pounds
  2. You can use this as a stepping-stone to a full current bank account.
  3. You will be given a cash card, as well as direct debit capabilities.
  4. You may also be given a debit card and payment by standing order.
  5. You may be offered a linked savings account, which can help you budget in the long run. What this means is that you can keep money in your savings account until it needs to be transferred over for the payment of a bill.

 

Basic bank accounts are just one of the many products that banks offer to make money. Whenever you go in to debt, the bank makes money. Thus, sales people in banks are never keen on pushing basic bank accounts. You will usually have to ask for one. The banks are required by law to offer basic bank accounts, but that does not necessarily mean that they have to promote it.

see FSA Basic Bank account information (opens PDF document).

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