There are many reasons that you may want to open a bank account. They can give you financial inclusion and independence, help to protect your money and help you to organise your income and spending. However, in some cases, you may be unable to open a bank account because you have an outstanding debt with the bank, or you have a history of falling into your overdraft on a regular basis. You will also be unable to open bank accounts if you have committed fraud or someone has committed fraud on your behalf.
Whatever the reason that you have had your application rejected, it can be detrimental to your finances as you struggle to find an alternative method of storing and saving money. It’s important that your savings are protected and invested or kept somewhere that can benefit you in the present and future.
Unbanked people are individuals who struggle to open bank accounts because of factors in their financial history, but luckily there are other options to consider. Whilst traditional banking methods have many benefits such as earning you interest and keeping your money safe, there are other ways to store your money until you are able or choose to open a new bank account.
In this article, we’ll explore the process of opening a bank account and the difficulties that you may face because of your financial record or personal circumstances. We’ll also take a look at your options if you find yourself unable to open a bank account, such as short-term and long-term solutions.
What should I do if I can’t open a bank account?
The first thing that you should do if you discover you can’t open a bank account is to find out why. Most banks will provide you with a reason if they reject your application, which can help you to work on these areas before you apply again in the future. You could also consider approaching other banks as they may have different rules when it comes to accepting applicants with a poor credit report.
You could consider other options than bank accounts, such as prepaid cards, peer to peer lending or traditional money storage alternatives such as safes. Another option is to turn your money into assets by investing in property, shares or gold. This means that you have more freedom with how and where you save your money because you aren’t tied to the stipulations set out by the bank.
Continue reading to find out the reasons that you may not be able to open a bank account and the alternative methods that you can use, including both physical and virtual systems.
Why can’t I open a bank account?
Every bank has a set of stipulations that customers must meet in order to open an account with them. If you don’t meet these, the bank has a right to refuse service to you. The main reason that banks wouldn’t accept your application for a basic bank account is if you have a bad credit history for reasons such as unpaid debts, a history of going into your overdraft or previous convictions for fraud or theft.
Banks don’t want to work with customers who have a history of not paying back what they owe or have been accused of fraud in the past. This includes various types of fraud such as chargeback, internet and money mules. It could cause them to lose money, which can affect their business if this happens on multiple occasions.
Another reason that you may not be able to open a bank account is that you don’t have the required documents or identification. Some banks won’t accept customers without a permanent home address as it’s difficult to trace or contact them. This includes refugees and individuals who are in the process of moving and are in between addresses. It’s also important to verify your identity, so you may be refused service if you can’t provide the required documents or photo identification.
What are the challenges of being unbanked?
If you don’t have a bank account, you are considered ‘unbanked’. Being without a bank account can affect how you are paid your wages or pension. It can also have an impact on your social benefits, as well as how you are able to make payments and take out loans. There are also many people who are ‘underbanked’, which means that they may have a savings or checking account, but they also rely on alternative (and often expensive) financial services like payday loans.
Bank accounts allow you to safely store and manage your finances. Without one, it can be difficult to organise your spending and savings, set financial goals or pay your bills on a regular basis. Many businesses such as mobile phone and electricity companies provide the best rates for customers who pay their bills via direct debit. This could mean that you end up paying a higher premium if you are unable to set up monthly transfers from a bank account.
Many people get their first bank account when they are a teenager and then develop into established customers in the following years. This means that banks look upon them more favourably and will give them better deals when it comes to mortgages and loans as they seem financially reliable. Someone with a poor or non-existent credit history will struggle to get these loans granted or set up bank accounts in the future.
Being unbanked creates a vicious cycle that can cause you long-term problems. You are unable to improve your credit history if you haven’t been approved for a bank account, but you cannot boost your credit score without a bank account.
You can improve your prospects of getting approved for a bank account by using comparison sites to see which accounts you have better chances of getting approved for. Another option is to try applying for basic bank accounts as they are designed for customers with poor credit scores. In the meantime, there are a number of other ways that you can store or invest your money.
How is technology able to help the unbanked population?
Over one billion adults in the world don’t have access to bank accounts. There are several reasons why people may not have a bank account, such as a lack of trust in financial institutions, not having the right documentation or not having enough money to open an account. Because of this, some people are turning to alternatives to traditional banking methods as they aren’t as restrictive or exclusive.
Traditional banking can be challenging for unbanked adults as they are often rejected for bank accounts due to their poor credit history. Below are just two of the alternative methods that have become increasingly popular in recent years.
These cards are flexible because they aren’t directly connected to a bank account. Some cards are also single-use only, which means they can be disposed of after one transaction. You can only spend the amount that has been pre-loaded onto the card, which means that you are unable to go into an overdraft or get into debt.
Prepaid cards usually require a bank transfer to put money onto the card. This could be difficult if you are unable to open a new bank account, although you could use a bank account you already have. However, another individual could act on your behalf through their own bank account or you could top up the card by paying in cash via a Post Office. Employers can also use bank transfers called BACS to pay your salary onto a prepaid card.
Here at Getsby, we offer two types of prepaid cards – Virtual Green and Virtual Black. Virtual Green cards can last up to three years and can be topped up with more money, whilst Virtual Black cards are disposable with a maximum top-up limit of €500.
Fintech is an emerging industry full of start-up companies that use online banking and apps to offer financial services. Some fintech companies operate a system that allows consumers to pay a subscription fee to open an online account without any background checks on their credit history.
You can also use some fintech apps to improve your credit score by opening a secure line of credit against your own savings. These systems are especially helpful to refugees who had a good credit history in their home country and want to convert or replicate it to improve their current credit score.
Why is financial inclusion important?
Financial inclusion means that financial services are available with equal opportunity to individuals from various backgrounds. It helps to ensure that products services are affordable and appropriate for everyone.
Individuals benefit from financial inclusion when it provides services and products that meet their needs. For example, you benefit from financial inclusion if you are able to make payments, savings and take out loans through banking systems.
Financial inclusion helps to drive economic growth and empowers individuals to make the best decisions when it comes to saving and spending their money. Participation in the financial system can help individuals to buy property, start their own businesses and invest in the community.
Prepaid cards are just one of the alternatives to bank accounts that can help towards financial inclusion. They can also be used to help individuals act on behalf of vulnerable adults, such as the elderly and individuals with learning difficulties, to carry out essential activities. These methods can help to increase the confidence of vulnerable or disadvantaged members of our communities and improve their financial opportunities.
How can I improve my credit score?
It’s important to have a good credit score as it allows you to open an account with a bank or building society, as well as get accepted for loans, mortgages and credit cards. Your credit score can be improved by making good financial choices and making sure that you pay bills on time.
You can improve your credit score by making regular payments on time and in full to show lenders that you are reliable. Accounts that you have maintained over a number of years will help to improve your credit history because it shows that you have a good track record and will be likely to make the correct payments in future bank accounts too.
Paying your credit card bill and rent on time will also help to improve your credit score. Credit builder credit cards are a good way to help build your credit score if you have a bad credit history. They are specifically designed to help individuals build a credit history or improve it, although the interest rates are much higher than standard bank accounts due to the increased risk.
Most ‘credit repair’ companies promise to improve your credit score but ask for extortionate amounts of money to do things to improve your score that you can do yourself. This could include checking your credit history for areas that you need to improve or taking out a debt consolidation loan from a bank. It makes it easier to repay one debt than multiple smaller ones.
Many credit agencies offer a free credit score check that will give you a number that indicates how good your score is. Most checkers list a number between 700 to 999 as the best possible score and then indicate where your personal credit score ranks.
What are the different types of bank accounts?
There are various types of bank accounts in the UK that are tailored to suit a variety of needs. The most common types of bank accounts are listed below:
- Basic account
- Savings account
- Current account
- Student account
Basic accounts can sometimes come without a monthly fee, which is why it is a good option for individuals who don’t qualify for other types of current accounts. Current accounts are one of the most popular types of accounts because they also don’t tend to have a monthly fee but offer a wide range of services and benefits that can help customers manage their day to day banking.
There are different types of savings accounts, such as ISAs, easy-access savings and regular savers. It depends on the type of account as to whether you pay tax on the interest or not, as well as how often you would need to access the money in the account. For example, cash ISAs tend to have a tax-free allowance on the interest you accrue.
The Financial Services Compensation Scheme (FSCS) protects customers for up to £85,000 (€ 100,000) if the financial service they use goes bankrupt. The FSCS can pay some compensation to customers if a bank is unable to pay them what they are owed.
What information do I need to apply for a bank account?
Your application to open a bank account may get rejected if you don’t supply the necessary documents that the bank asks for. Some of the documents that you need include evidence of your residential address, photo identification and other contact details such as your phone number and email address.
This information is needed to verify your identity so that the bank can check your credit history, along with multiple ways to contact you about your account and finances.
There are a few reasons that you may not be able to open a bank account. You may not have provided the bank with the right information, or you may have a poor credit history. A bad credit score can impact your ability to open a new account with a bank or credit union because banks will be reluctant to lend money to individuals who have unpaid debts or a history of getting into their overdraft.
There are alternatives to bank accounts if your application has been rejected for some reason. You can invest your money in tangible assets, in stocks and shares or use a prepaid card instead of a standard debit card. You could also apply to other banks as they may have different rules when it comes to accepting new customers who don’t meet traditional requirements in terms of credit scores.