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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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