IVA Bank Account – Basic Bank Accounts
The issue of whether you will be required to open a new bank account with a different bank before you enter your IVA can, in some circumstances, be quite confusing.
In some cases it will not be necessary, yet in other cases it will.
Then there's the decisions as to which bank you should migrate to and what type of account you should try to open if you do need to move.
Do I need a new bank account for my IVA?
If you have any outstanding credit agreements with the bank that provides your bank account, such as an overdraft, a credit card or a loan, you will need to included them in your IVA.
As a result, you will also need to open a new bank account with a new bank.
This is the case even if your bank account has no overdraft facility.
Why do I need to move banks?
Banks have the right to ‘Set-Off’ which means they can transfer funds from one of your accounts to another, in the event that one of your account has fallen into default.
Further more, they do not need to seek permission from you, the account holder, before they exercise this right.
As a result, if you enter into an IVA and do not move your account to another bank, your bank are within their rights to withdraw funds from your current account and use it to repay money owed to a loan that's included in your IVA.
Furthermore, your bank will prioritise themselves and if insufficient funds remain in your account to meet your ongoing Direct Debits or Standing Orders as they fall due they will charge you fees for returned payments and unauthorised borrowing.
So, for your own protection, it's advisable that you open a new basic bank account with a neutral creditor before you enter an IVA.
What if I don't have debts with my current bank?
You should give serious consideration to moving to a new bank, even if you have no credit agreements with your existing provider.
Particularly if you hold a 'current account' rather than a 'basic bank account'.
If you hold a standard current account, and your existing bank becomes aware of your IVA some time in the future, they will probably give you as little as 30 days notice to close your current account down and remove your banking facilities.
Why a basic bank account?
Your new bank account must not have any credit facility attached to it. There should be no overdraft, no cheque book and no credit card attached to the account.
This type of account is called a 'basic bank account' although, as shown in the table below, each provider calls their version of a basic account by a different name.
Most basic accounts do provide internet banking and a debit card, which allows you to spend money electronically through cash points and over the internet, and all basic bank accounts provide Standing Order and Direct Debit facilities too.
Once opened, the day to day differences between a current account and a basic account are minimal.
Different types of basic bank account
The table below shows which banks and building societies offer basic bank accounts and the name they call their version of the basic account.
All these accounts accept Automated Credit Transfer (ACT) payments, offer cash withdrawals at the Post Office and a cash-machine card.
|Direct Debit||Standing Orders||Debit Card||Online Banking||Mobile Banking||Telephone Banking||Branch Access|
|Bank of Scotland||Basic Bank Account||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Bank of Ireland||Basic Cash Account||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Barclays Bank||Basic Current Account||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|First Trust Bank (NI)||Basic Bank Account||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|HSBC||Basic Bank Account||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Lloyds Bank||Basic Account||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Post Office||Control Account||No||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Royal Bank of Scotland||Basic Account||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Santander||Basic Current Account||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|The Co-operative Bank||Cashminder||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Ulster Bank||Foundation Account||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Danske Bank (NI)||Danske Standard||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Virgin Money||Essential Current Account||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
- Banks may cancel SOs/DDs if you don’t have enough money in your account to pay them on more than one occasion.
- Correct at time of print but always check with the bank or building society.
- The account may be closed if a Direct Debit or standing order is refused three times.
For more information on any account named above visit the website of the provider. Full terms and conditions will be available there, along with details of the application process.