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Choosing a bank account for your universal credit payment

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

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.

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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.

Compare current accounts

Current accounts come in all shapes and sizes so it pays to shop around for the features you want – visit the current account comparison tool on the Money Advice Service website.