Consumers without a bank account face ‘poverty premium’

Over one million consumers who do not have a bank account pay on average £485 for household services according to new research by Pockit.

The digital current account provider found that around 1.23 million ‘unbanked’ individuals are missing out on preferential deals and discounts on utility bills, mobile phone contracts, broadband and personal loans.

The research analysed prices from leading service providers indicated that energy and broadband providers and mobile phone companies offer discounts to customers if they pay by direct debit – a saving which is not available to those without a bank account.

The report found that:

• Energy and broadband providers offer discounts to customers if they pay by direct debit – a saving which is not available to those without a bank account.
• Mobile phone companies offer better deals to those paying via direct debit rather than pay-as-you-go customers
• Those without accounts have limited options when looking for credit, and often turn to expensive cash-in-hand ‘doorstep loans’

Customers without a current account had to pay using methods such as cash transfers, costing them £38 more a year on average. Analysis of Ofgem data and found that those using pre-payment meters paid on average £141.57 more each year than those who paid by direct debit. In one example from the report, the research found two of the UK’s three largest broadband providers, BT and Virgin Media, offered a “super line rental discount” if you paid by direct debit.

Banks can reject customers applying for accounts if they do not have enough forms of ID, or if their credit rating is poor.

Pockit Chief Executive Virraj Jatania said “For many of us, having a bank account is a basic fact of life. Yet the unbanked face a banking poverty premium which can put a real strain on their finances.”