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You can still use a bank account during a protected trust deed but you might need to switch to a new bank before it starts.
Your new account should be a “basic bank account” which may not sound very appealing. The good news is that these basic accounts can actually work very well. We explain below:
• Which new banks to consider
• The basic bank accounts they offer
• How to open your new bank account
We also explain below:
• Why switching is necessary
• Which banks to avoid
• Why switching is easier than it used to be
For advice on starting a protected trust deed (and connected bank account issues) please contact us.
We suggest that the following basic bank accounts may be suitable during your Scottish trust deed.
Click the links to read more about these banks accounts and how to apply for them.
• Nationwide FlexBasic Account
• The Co-operative Bank Cashminder Account
• Barclays Basic Current Account
• Contactless debit card
• Online and telephone banking
• Online application process
• Functional account services
• Reasonable customer service rankings
• Switching guarantee
• Overdraft
• Cheque book
The Co-operative Bank Cashminder Account and the Nationwide FlexBasic account are both available as a joint bank account.
This may be helpful if you are planning to enter a joint trust deed.
There are three important reasons to switch your bank account before your trust deed begins:
1 – Avoid Set-Off
“Set-off” is a when a bank takes money from one account to repay another.
This is a risk if you owe money to the bank where you also hold your current account. An example could be a Barclaycard credit card held by a person who also uses a Barclays bank account.
If you fall behind on the credit card payment (which you will if you embark upon a trust deed) the bank can simply take the money from your current account. This process is known as “setting-off”.
Set-off could leave you without money to pay your rent or mortgage and other essential household bills.
The risk of set-off is avoided by switching to a new bank that you don’t owe any money.
2 – Avoid a Frozen Account
Banks sometimes freeze your bank account if you start a protected trust deed in Scotland. This is especially likely if you owe money to the bank (a loan or credit card for example).
A frozen bank account could leave you temporarily unable to pay essential household bills and expenses.
Your trustee might be able to persuade your bank to unfreeze the account, but this will not be immediate.
The risk of a frozen bank account is reduced by opening a new basic bank account at a bank you owe no money.
3 – Avoid Sudden Account Closure
Your bank might suddenly close your account. This is more likely if you owe them money, if you have open credit facilities, or if the bank account you have isn’t available to people using a Scottish trust deed.
The risk of sudden account closure is also reduced by opening a new basic bank account at a bank you owe no money.
We advise you to avoid the Santander “Basic Current Account”. Our forum visitors have expressed frustration that the debit card can’t be used for contactless payments or recurring payments. Better and more functional basic accounts are available elsewhere.
Open your new current account at a bank you owe no money. You’ll invite problems if you switch to a bank that’s also included in your trust deed creditor list.
Avoid banks with poor customer service ratings. At the time of writing the following banks have received especially poor customer service ratings in the regular Which? survey:
• Tesco Bank
• Royal Bank of Scotland
• Clydesdale Bank
• Bank of Scotland
Most banks now subscribe to the current account switch guarantee. Your old and new bank should work together to transfer your direct debits and standing orders within seven days.
You only need to arrange for your income to be paid into your new bank account. Contact your employer, pension provider, or benefit provider to arrange this change.
The advice and suggestions provided above apply equally to switching your bank account before going ahead with bankruptcy in Scotland.
The risk of sudden account closure and frozen bank accounts is less severe with the Debt Arrangement Scheme and debt management plans. You may still need to switch bank accounts before starting these types of debt management solution to eliminate the risk of set-off.
For advice about starting a Scottish trust deed and other debt solutions please get in touch.
Our advisers will identify debt solutions that meet your needs. We can also analyse whether you’ll need to switch to a new bank account before you go ahead.