Choosing a bank account for your benefit payments

Money Advice Service

To receive Universal Credit and other benefits, you’ll need a bank or building society current account, or an account with an alternative provider like a credit union. The account must allow you to both make and receive automated payments. Here we explain the options available and the pros and cons of each one.

Which accounts can receive benefit payments?

Make the most of your Universal Credit payment with personalised help from our Money Manager tool.

You will need an account that can receive automated payments.

The options are:

  • current account
  • basic bank account
  • prepaid card.

If you’re unable to open any of these accounts, contact the office responsible for paying your benefit to find out how you can get your benefit paid to you.

If you’re renting from a social landlord, check whether they recommend a particular account – if so, you don’t have to use it, but some landlords will pay you an incentive if you do.

Setting up payments for rent and other bills

Ideally your account should also allow you to make automated payments out of the account, such as Direct Debits or standing orders, for bills like rent, gas and electricity.

Only these accounts allow you to make outgoing automated payments:

  • current account
  • basic bank account.

Some prepaid cards do not allow you to make outgoing automated payments.

What does each account offer?

Services and features Current account Basic bank account Prepaid card
Accepts Universal Credit and other benefit payments Yes Yes Yes
Accepts other forms of income, such as wages from work Yes Yes Yes
Allows Direct Debits and standing orders Yes Yes Not always (check with the provider)
Overdraft facility Yes No No
Cash card with PIN for cash machine Yes Yes Yes, although you might be charged
Debit card Yes Sometimes Most prepaid cards can be used in all the same places as a debit card
Cheque book Yes No No
Credit checks needed when you open the account Yes No No
Fees and charges Fees and interest on overdrafts. Charges for refused Direct Debits No fees Charges vary. Can include fees for set-up, to top-up, & for withdrawing cash

You can also use our Bank account fees and charges comparison tool to see all the fees and charges that apply to bank accounts – it shows everything from overdraft fees to foreign cash withdrawal charges.

Current accounts

Most people use a current account to manage their day-to-day money. This is because a current account doesn’t have any of the restrictions of a prepaid card.

Current accounts are offered by banks, building societies and some credit unions.

Bank and building society current accounts

  • They have all the features you might need, such as automated payments, cash cards, debit cards, Direct Debits and cheques.
  • You can access most current accounts through a high street branch, online, using mobile banking or over the phone.
  • You can get regular statements to help you keep track of your money.
  • Some accounts charge high fees and interest if you go overdrawn, and most have bank charges if there’s not enough in your account to cover a Direct Debit or standing order.

Credit union current accounts

If you’re having trouble getting accepted for a current account with a bank or building society, you might want to try a credit union.

You won’t need to pass a credit check to get a credit union current account, because these accounts don’t usually offer overdrafts.

Credit union current accounts usually charge an administration fee of £5 to £10 a month, especially if they offer budgeting advice.

Find out more in our guide to credit union current accounts.

Fee-free basic bank accounts

If you don’t have access to a standard bank account, a fee-free basic bank account can make it much easier to manage your money.

These accounts don’t have an overdraft facility, so you won’t be able to get into debt by spending more than you have.

Read our guide to fee-free basic bank accounts.

Prepaid cards

It’s possible to have your benefits transferred onto a prepaid card. But there are a few things you need to be aware of before going ahead.

  • Prepaid cards come with a variety of charges. You will need to check with the provider before you buy.
  • Having all your money on one card doesn’t allow you to keep your money for bills separate from your money for spending.
  • Not all prepaid cards allow you to set up automated bill payments for your rent, gas or electricity. This can mean having to withdraw large sums of cash each time a bill needs to be paid.

However, they do have some advantages:

  • You can’t get into debt as there’s no overdraft facility on a prepaid card.
  • It’s possible to make one-off electronic bill payments with some prepaid cards, giving you control over when the payment is made.

One way of using a prepaid card is to operate it alongside a bank account. You leave enough money to cover your rent and other bills in your account and load all of your spending money onto the prepaid card. This gives you control over how much you spend and means you avoid bank charges and penalties on your account for returned standing orders or Direct Debits.

Choosing the best bank account for your needs

Comparison websites are a good starting point if you’re trying to find a current account or basic bank account that’s right for your needs.

We recommend the following websites for comparing bank accounts:

Remember

  • Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
  • It is also important to do some research into the type of product and features you need your bank account to offer.
Find out more in our Guide to comparison sites.

Joint or single account?

If you’re married or living together, you’ll get a single Universal Credit payment for your household.

You’ll be asked to nominate which bank account you want to have your money paid into and this can be:

  • a joint account in both of your names
  • a single account in either your name or your partner’s name.

Opening your bank account and setting up bill payments

If you’re not sure how to open an account, watch our video – How to open a bank account.

Read a transcript of this video

Customers can now switch their current account in seven working days.

To find out how to switch your account, follow the link below.

This article is provided by the Money Advice Service.

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Key things to remember when using Rest Less Money:

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We hope you find Rest Less Money a useful resource and we would welcome your feedback at [email protected] on how to make it even better. For more information on any of the above you can read our full terms and conditions.

Some important information about Rest Less Money

We want you to understand the positives, but also the limitations of using our site. We operate in a journalistic manner and therefore all information, guidance or suggestions provided are intended to be general in nature, and you should not rely on any of the information on the site in connection with the making of any financial decision.

When we set out to build Rest Less Money, we wanted to be a trusted place where you could find helpful information about financial matters affecting the over 50s. As a free to use resource, we try hard to provide the best information we can, but we cannot guarantee that we won’t occasionally make mistakes. So please note that you use the information on our site at your own risk, and we can’t accept liability if things go wrong.

Key things to remember when using Rest Less Money:

We do not offer financial advice – As a journalistic site, it’s important to know that we do not provide financial advice. You should always do your own research before choosing any financial product so that you can be certain it is right for you and your specific circumstances. If you are in any doubt, please seek professional financial advice from a regulated financial advisor.

No Liability – please note that you use the information on Rest Less Money at your own risk and we can’t accept liability for how you choose to use the information given on our site. We will often provide links to content or products and services available on other third-party websites. These are provided purely for your convenience and we cannot be held responsible for any content, or any of the products and services offered on any website that we link to.

 

Accuracy of Information – We try to make sure that all the information provided on Rest Less Money is correct at the time of publishing as we want it to be the most helpful resource possible. Sadly, we are not perfect however, and so we can make no guarantees as to the completeness, accuracy, adequacy or suitability of the information available on the site.
Whilst we work hard to try and provide accurate information, deals and prices can change, so whilst they may be correct at the time of writing, providers may subsequently decide to alter them later – so always double check first.

A final note on the Rest Less Community Forums – always remember that anyone can post their opinion on the Rest Less Community Forums, so it can be very different from our own opinion and may not be factual or well researched. Always be wary of any content posted on the forums and be sure to do your own research and due diligence on anything suggested. 

We hope you find Rest Less Money a useful resource and we would welcome your feedback at [email protected] on how to make it even better. For more information on any of the above you can read our full terms and conditions.

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