Is a Bank Account Worthwhile for Poor People

Most of us take having a bank account for granted. It is the mechanism through which we are paid by our employer, and enables us to manage our finances. We put money into savings accounts (to earn interest) when we have spare money, and make use of our overdraft facility (in many cases) when we are short of money. We also use our debit card to buy goods in stores and online, and easy access to cash machines means we only ever need to carry a small amount of cash.

There is, however, a sizeable number of people who don’t have a bank account. In the UK, for example, it is estimated that one in twelve households have no bank account. This is despite the fact that the banking industry introduced no-frills basic banking accounts, aimed specifically at customers who would previously have failed the current/checking account eligibility criteria.

So why is this figure so high? The answer is a combination of factors. Firstly, there are still some customers who apply for a bank account but are rejected. This will most likely be because they have a poor credit history with things like county court judgements showing on their record. However, the introduction of basic banking accounts, which don’t allow the customer to become overdrawn, has reduced this category. The other reason is that there are some people who simply don’t want a bank account. They may be suspicious of banks or just prefer to deal in cash.

There are, however, some very good reasons for having a bank account. These include:

– Employers usually require you to have a bank account for them to pay your wages into.
– Security of your money. Even if your bank is robbed, you are guaranteed to get your money back. However, if you hide your cash in your house and are burgled, you won’t get your money back!
– Interest. A major benefit of having bank accounts, is that you can put spare money into a high interest savings account so that your money will create more money for you. Remember that the effect of inflation (i.e. rising prices) in the economy means that if you keep all your money in cash its value will erode. 1,000 now will buy you much less than it would have 10 years ago or 20 years ago, etc.
– Access to credit facilities. Although many people are rightly concerned about the risk of getting into debt, there are times when the availability of bank credit is very useful. There’s not very many of us, for example, who could afford to buy a house without the help of a mortgage. An overdraft or credit card can also act as a useful buffer against unexpected costs.
– Convenience. Being able to pay for goods with your debit card, or withdraw money as and when you need it via a cash machine, is really convenient. It also reduces the need to carry around large sums of cash which is a security risk.
– Cheaper payments. Utility companies often offer discounts to people who arrange to pay via a regular direct debit from their bank account. Continuing to pay by cash, therefore, will cost you money.

As I’ve hopefully demonstrated, there are plenty of good reasons for having a bank account. Those who are suspicious of banks may point to bank charges as a reason for continuing to deal exclusively in cash. However, banks will only apply penalty charges where customers exceed their agreed limit. Additionally, for those who are worried about their ability to stay within their means, there is the option of opening a basic bank account that doesn’t contain an overdraft. With these accounts, it is physically impossible to go overdrawn, although the downside is that you won’t be able to have a debit card.

For those who would like full current/checking account functionality but who are only able to open a basic bank account, there should be an opportunity at a later date to upgrade to a more advanced account.

Having a bank account should make your life considerably easier, and can be the first step on the road to improving your financial position. And with the availability of Internet banking, telephone banking, mobile phone banking, and the ability to check balances at cash machines, banking customers are now better placed than ever to successfully manage their accounts and avoid charges.


Citizens Advice Bureau,

British Bankers’ Association,