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Bank-free current account launches: our verdict

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A current account that doesn’t require people to join a bank launches today.

The U personal account allows users to make payments with a contactless debit card and pay bills through direct debits or standing order but does not offer an overdraft facility.

The company said the online account will help users “racking up large debts through unauthorised overdrafts”.

U founder Alex Letts said: “The dirtiest secret in the UK banking sector is with the way people are charged.

“Free-if-in-credit accounts are only actually free for 56% of people. The other 44% represents about 24 million customers.

“Banks can only provide a free service for wealthier customers because of the fees and penalty charges paid by millions of normal households battling with incredibly tight budgets. Those costs are mainly for unplanned and exceeded overdrafts.”

The average unauthorised overdraft fee — when the bank has not agreed to a customer going overdrawn — is £57.50 a month, according to research by Moneyfacts. At that average fee, if someone were to go overdrawn every month they could end up paying £690 a year.

And worryingly, more than a quarter of people fall into overdraft territory just 17 days after payday.

The U account encourages users to set up and regularly pay into an “overdraft buffer account”.


If you’re someone who regularly goes into your overdraft, this account could save you money.

However, you need to bear in mind the costs.

There are three account options charging a monthly fee of £0, £5 and £10. With the £0/£5 options, you have to pay £1/50p for direct debits and ATM withdrawals so costs could easily mount up. These charges don’t apply to the £10 a month option.

One good thing about the account is it helps you budget your money. Users are able to visually budget their money and automatically funnel away the correct sums for their various outgoings into separate sub-accounts.

For example, there could be an extra account for rent, another for gas and electricity and another for phone bills, all managed on one smartphone dashboard.

Andrew Hagger of said: “Apart from allowing you to budget your money I’m not sure what it gives you over and above a basic bank account offered by the high street banks which also don’t allow overdraft facilities, yet are free to use.”

The following banks offer ‘Basic Bank Accounts’ – with no overdrafts permitted: Bank of Scotland, Barclays Bank, Clydesdale Bank, Halifax, HSBC, Lloyds, Metro Bank, Nationwide B S, NatWest, Post Office Money, RBS, Santander, Co-op Bank, TSB, Virgin Money and Yorkshire Bank.

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  • RussellR

    Like Andrew Hagger of I can’t see the benefits either. It just seems to be an electronic budgeting system. As there is no overdraft available, if you don’t have the money you still can’t pay your bills. just like a Basic Bank Account from a high street bank. The HSBC Basic Bank Account also does not charge for standing orders or direct debits and there are no fees or interest should the account have a debit balance.

    Why pay a monthly fee and/or transaction fees to U?

    Oh – and where does Alex Letts hold your money so that you do not have to be a bank customer? In a bank (Barclays), of course!!

    U state that they ringfence customers money so it is not available to U or their service provider should either be wound up. However, their website also makes clear that should Barclays fail (admittedly unlikely) – “Your money is at risk only in the unlikely event that Barclays become insolvent.”
    So customers of U do not have the benefit of the Financial Compensation Scheme which could cover a bank customer up to £75,000 at present.

    • Alex Letts

      I think both Andrew and Russell have slightly missed our raison d’etre, which is to provide an account for people who don’t want the risk of getting into unplanned overdraft. These mistakes bring unexpected charges which currently average £54 pcm according to Moneyfacts.

      It is 100% true that if you require an overdraft and if you want a basic account, then there are alternatives that might well suit you better, but for 24% of all customers of banks, an alternative to unexpected overdraft charges, with an account that helps you budget, ring-fence funds, manage money and avoid debt, certainly does have real attractions.

      It’s all about market segments. And Andrew and Russell might not fit this segment, I suspect.

      On the slight barb about us using Barclays: I have frequently made the point that banks are great wholesalers, but that they are not great with certain market segments, and certainly they would be the first to admit this. There is no hypocrisy or paradox here. We remove the pain (and we maintain, costs) for our segment from dealing direct with a service provider (in this case Barclays) better geared to serving businesses like ours than, in our opinion, meeting the needs of millions of individuals in a modern, innovative, customer-centric framework.

      On the FSCS issue, this is a bone of contention at the moment and one we will need to advance with the FSCS themselves. It is hard to understand why one set of customers can get FSCS by virtue of having individual accounts at Barclays, whereas those with clearly reported funds on a nightly ledger. lodged at Barclays, cannot. The risk to FSCS is the same. It needs correction.

      Finally though, U account is designed to compete with current accounts, in which one would be unlikely (and indeed unable in our case!) to keep £75k on account. FSCS primarily benefits savings, rather than day to day spending accounts. Our customers simply do not have those sorts of funds.

      I do hope this is helpful to all readers and if anyone would like further info, please contact us via

      All the best to U

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