In a recent survey to help promote a better understanding of Basic Bank Accounts, Virgin Money has found that one in six people (16%) expect the cost of Christmas to mean they are likely to use their overdraft over the festive period, which would equate to over 8 million people across the UK. Of those likely to use their overdraft this Christmas, 42% say they will struggle to afford the interest charges that they will incur as a result of being overdrawn.
Although the festive period is not yet in full swing, people are already thinking about how they can improve their finances in the New Year. Over half (53%) want to be more in control of their money than they are at the moment and to achieve this, 41% of people intending to make a New Year’s resolution will look to manage their money and finances better in 2018.
While the research shows that overdraft charges will be unaffordable for some, many are unaware of the benefits a Basic Bank Account can offer. Nearly one in two (48%) are unaware of bank accounts that can prevent people going overdrawn and therefore avoid overdraft charges.
Basic Bank Accounts have many of the key features of a current account, but protect customers from the costs of going overdrawn, and charge no unpaid item fees. However, one in three (32%) believe Basic Bank Accounts are only available for the financially excluded who are unable to get another type of bank account.
Rhian Emmanuel, Current Account and Savings Director at Virgin Money said: “Although most people look forward to the Christmas party season, the financial hangover can be painful for many. Rather than waiting until January, I’d encourage people to take control of their finances now, by making sure they have the right account to achieve their money goals in the New Year.”
“Many people believe that a Basic Bank Account is only for people on lower incomes or the financially excluded. That could mean some are missing the opportunity to take control of their finances and avoid unexpected overdraft charges. Opening a Basic Bank Account could be the first step towards financial health for a much broader range of people than you might expect.”
The research also showed how many people can unexpectedly incur overdraft charges, with one in seven (14%) saying it can come as a surprise when they start using their overdraft. It is even more likely for younger generations, with the figure increasing to one in five (19%) for 25-34 year olds, and almost one in four (23%) of 18-24 year olds.
Virgin Money’s Basic Bank Account, the Essential Current Account, protects customers from going overdrawn, charges no unpaid item fees and pays credit interest. It comes with a contactless debit card and has no currency commission charges on overseas transactions – and it’s open to everyone who wants a simple, fee-free current account.
The research from Virgin Money comes after the financial charity StepChange recently called for banks to end unauthorised overdrafts because they are trapping people in persistent debt.