Bank account, credit union, or an e-money current account; deciding which is right for you isn’t always easy. Since the global financial crash of 2008 consumer confidence in traditional high street, banks have markedly fallen. In 2015 the UK still lags behind much of the world in terms of trust in banks.
According to accountancy firm EY, 37% of Brit’s surveyed last year said they had less trust in banks today than 12 months ago, compared with 11% having more confidence. 15% of British respondents reported minimal or no trust in their bank. This level is double that found in the US, Germany and France and puts the UK around the same confidence level as Russia and Spain.
At the same time, lenders have been tightening up their offering and current account criteria making accessing even basic banking services increasingly difficult for thousands of people across the UK.
Bank Account Alternatives
What are the alternatives? Credit Unions and e-money current accounts often charge lower fees but, may come with lower interest rates or fewer additional services such as a large branch network and 24/7 customer service. Which of the three is right for you depends on your individual banking needs and financial history. There are four main areas you should review when considering where to keep your money:
- Criteria and eligibility
- Additional services
Criteria and Eligibility for a Bank Account
High street banks each set criteria for opening either a current account or a basic bank account. Criteria are generally based on credit history and checks, which can prelude acceptance for those with poor credit history, or anyone with difficulty proving their address.
Credit Unions typically only serve a specific local area and may also only serve particular professions or roles within that community, such as employees of the police force or fire service. In general, you need to share a ‘common bond’ with other members.
E-money current accounts, into which your employer can pay wages, often operate in a similar manner to credit unions, in that you need to be a member to access services. However, joining an e-money current account provider can be much simpler as they do not require customers to be from a specific area or profession and in some cases may not require a credit check.
The big four banks, RBS, Barclays, Lloyds and HSBC have over 6,000 branches between them making accessing traditional banks still the easiest option. In addition to this, most offer 24/7 banking via a combination of telephone, online, and mobile banking services. Bank account holders also have access to any of the UK’s 69,000 cashpoints.
Traditionally credit unions were small, local, non-profit organizations working in specific communities. Today credit unions retain that ‘local community’ ethos but have moved away from being a small operation and are starting to offer online services. Some credit unions are moving away from just providing savings and loans by adding current accounts and even mortgages to their services. Where credit unions do offer current accounts they are (in general) provided by the Co-Operative bank and allow access to cashpoints via a debit card.
E-accounts, like credit unions, come with a variety of different services. Providers such as Suits Me give customers access to both online banking, mobile banking, and a Mastercard® debit card – similar to high street banks – which can be used in over 24 million places worldwide. E-money current accounts generally allow customers immediate access to funds and some will pay wages earlier than received, in a similar way to a current account overdraft.
Banks offer a variety of additional services with current accounts and premium current accounts. These vary from contactless payment cards to travel insurance, breakdown cover or cheaper loan products and cashback offers on the high street.
Credit Unions have traditionally been focused on just savings and loans. Whilst they do offer current accounts most do not offer the additional services banks can and do give customers.
E-money current accounts and membership schemes tend to offer a wide variety of added extras. Like Suits Me, have high street cashback offers. Suits Me works with some of the biggest high street retailers offering cashback of up to 15% to all of its members.
Costs and Fees
Current account charges and fees vary between banks. Whilst basic bank accounts are, in general, free, current accounts offering premium features such as higher interest rates or insurance, generally have a cost attached. This can vary between £1 and £15 per month.
Whilst credit unions do not usually charge a fee for savings they do often charge for current account services. This is because they are provided by a third party and incur the credit union additional administrative costs. Generally the fee for a Credit Union’s current account will be around £1.50 per week, which can be a cheaper option than some high street banks.
Finally e-money current accounts will also charge a small fee for their services, this could be around £2 per week for members. Withdrawals from cashpoints may incur a service charge, though like Suits Me many providers will offer members a number of free withdrawals every month.
For more information on how a Suits Me e-account works and how you can access cashback from high street retailers, why not talk to one of our advisors? You can call Suits Me on 03330 151 858 or email us on firstname.lastname@example.org.