Not having a bank account costs the UK’s ‘unbanked’ £500 extra a year

The finding comes from research carried out by digital current account provider Pockit, which showed that more than 1.2 million Britons still do not have a bank account and are therefore hit by a ‘banking poverty premium’ because they miss out on discounts reserved for those who pay bills by direct debit.

The firm said the so-called “unbanked” of Britain see the cost of energy bills, broadband and phone contracts ramped-up.

“For many of us, having a bank account is a basic fact of life,” said Pockit boss Virraj Jatania.

“Yet the unbanked face a banking poverty premium which can put a real strain on their finances.”

People who have found it difficult to open a bank account include some migrants, those who cannot provide proof of a UK address, and individuals with poor credit histories. There are also some people who do not want a bank account.

Last month, a government financial inclusion report said those more likely to be without a bank account included 18- to 24-year-olds and the unemployed.

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

But Pockit, which provides basic account services, said this meant many were being penalised.

The firm, which has almost 500,000 UK customers, analysed official data and pricing information to calculate the banking poverty premium figure.

It looked at electricity and gas, mobile data, broadband and the interest on a 52-week loan of £300, and said the average annual cost for all these totalled £1,118 for people with a bank account. The equivalent figure for unbanked individuals was £1,603.

The extra £485 reflects the fact that energy, broadband and mobile phone providers often offer discounts and deals to customers if they pay by direct debit – savings not available to those without a bank account.

Pockit’s analysis of prices from leading service providers also found:

• 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”.

UK Finance, which represents the UK banking industry, said banks took their financial inclusion responsibilities “extremely seriously”.

“The banking industry is committed to ensuring banking is accessible to all. There are over seven million basic bank accounts in the UK, helping customers across the country access vital banking services,” it said.