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Bank Accounts

This page looks at the way banks approach you being in debt and having problems with making payments.

Bank accounts are reading available through normal high street clearing banks ( Lloyds TSB. HSBC, Barclays etc), or through Building Societies (Halifax, Nationwide etc) . More and more banking is done electronically online or by telephone giving greater and speedier convenience of money movement.

For details of options see http://www.financelink.co.uk/banks/

Payments in the main leave your bank account in several ways including

• By a cheque supported by a bank guarantee card or not, this may takes some days to be banked by the payee and several days to reach your bank.

• By a debit card similar to a cheque payment method but giving the payee an immediate answer by allocating the funds to pay the value of the transaction and clearing it in a few days like a cheque

• By a standing order to the bank to make a fixed payment at regular intervals

• By direct debit where your creditor (the person you owe) sends a request to your account to be paid a sum of money, this can vary in value or be fixed based on your instructions.

• Bank charges, interest and regular payments direct to your own bank.

Money may be coming into your account at regular known intervals for various items normally such things as

• Wages and salaries

• Benefits

• Pensions

If requests for withdrawal are made and there is insufficient money in your account the bank can do one of two things,

• Refuse to pay sending the payment request back "refer to drawer" commonly called a "bounce" usually charging a fee from £10 to £50 a time.

• Return the payment "refer to drawer, please represent" this is less common nowadays with automated banking but means - there is not enough money here now but is expected soon, trying again is likely to be successful. This is seen by your creditors as a "bounce" but is potentially more of a "temporary hiccup" in cash flow. This action usually requires a human decision of an account manager who knows you well, or can see a good history on the account. A fee may or not be charged.

Faced with a bounced (refused) payment and a "fine" the problem can quickly become a major disaster as the fine is added to the shortage of funds, before long many payments are unpaid and several hundred pounds added to the bank's charges.

This "knock on effect" can be serious and costly so if you know you are heading for a shortage of funds act quickly and plan ahead.

• Cancel standing orders and direct debits which are less vital, or if things are very bad ALL regular orders.

• Look at changing the payment dates to a period when money WILL be in the account - contact the payee and advise them (direct debits), and the bank if needed (standing orders)

• Contact the payees of some regular orders and see if you can adjust the values and length of term to reduce your outgoings.

If the bank account is managed very badly the bank may close or suspend the account, usually because the "fines" have made a heavy overdraft which the bank may feel they may not recover from you. Or they may ask you to move the account elsewhere.

Moving a bank account is not easy as potential new bankers like to see 6 months or more bank statements from your current bank to see how you conducted the account.

Opening or moving to a new bank account when in debt it not the best of ideas, or indeed necessary. If you have problems your employer may be able to assist especially if wages or salaries are normally paid to a bank account you MUST have a bank account.

Useful web sites

UK DOMESTIC CHEQUE GUARANTEE CARD SCHEME the UK Domestic Cheque Guarantee Card Scheme www.cardwatch.org.uk

Bank Accounts and Savings Accounts www.creditsmart.co.uk