IVA Bank Account – Basic Bank Accounts
Determining whether you will need to open a new bank account before you enter an IVA can, in some circumstances, be quite confusing.
Sometimes it will be necessary yet, in others, not.
And if you do need to move, there's then the decision as to which bank you should move to, and what type of account you should open.
Do I need a new bank account for my IVA?
If you have any outstanding credit agreements with the bank that provides you with your bank account, such as an overdraft, a credit card or a loan, then it is extremely likely that you will need to move to a new bank provider.
This is because all unsecured debts must be included in your IVA, including ones owed to your bank.
And this remains the case even if your bank account is not overdrawn or has no overdraft facility.
Why do I need to move banks?
Under the banks terms and conditions, they have the right to ‘Set-Off’ funds from one account to another. This means they have the right to transfer funds from a current account to another account under their control, held by the same account holder. They would typically exercise this right after a payment has been missed or an account falls into default.
They do not need to seek permission from you, the account holder, before they exercise this right.
As a result, if you enter an IVA but do not change to another bank, your bank will retain control over your money. They could withdraw funds from your current account to off-set against missed payments to a debt included in your IVA.
This may leave insufficient funds in your account to meet other Direct Debits or Standing Orders which, in turn, might lead to unauthorised borrowing.
Therefore, for your own protection, it's advisable to open a new basic bank account with a completely neutral provider before the IVA starts.
What if I don't have debts with my current bank?
You should give serious consideration to moving to a new provider even if you have no debt with your existing bank.
This is particularly true if you hold a standard 'current account' rather than a 'basic bank account'.
If you hold a standard current account and at some future date your bank becomes aware of your IVA, it is likely they will give you short notice before removing your banking facilities completely.
Why a Basic Bank Account?
Your new bank account should not have any credit facility attached to it.
There should be no overdraft, no cheque book and no credit card associated with the account.
This type of account is known as a ‘Basic Bank Account’, with each bank calling their version of a this type of account by a different name.
Most basic bank accounts function in exactly the same way as a standard current account, but without any associated credit facilities.
Internet banking, mobile apps and a debit card are usually standard features, and most 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, along with 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.
Explanatory notes
- Bank accounts can be accessed through online banking, mobile app, telephone banking and in branch.
- 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.
More Information
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.
