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How do you live without a bank account?

By Vanessa Barford
BBC News

Cutting card
With banks teetering on the brink of collapse can one live without a bank account?

"Everybody knows," said Gordon Brown, "that if you don't trust the banks you can't do very much."

Paying utility bills, receiving a salary, simply vouching for who you are - the 14-digits that comprise a bank account number and its sort code are almost as intrinsic to one's identity these days as name and postcode.

But with some High Street banks teetering on the edge of collapse this week, these once-rock solid institutions are looking more like a liability than a secure home.

So what if you were to wash your hands of banks all together?

"It's almost impossible to operate without a bank account," says Tim Newhouse, an analyst at price comparison site moneysupermarket.com.

It's a brave option to take - people who stick to cash should have a bank account as a fall-back position
Tim Newhouse

"Firstly employees need a bank account to be paid by their employer, unless they are paid cash in hand or work on the black market economy. Then there is the house you live in. If you own a house outright, you're probably quite relaxed. But if you don't have a bank account, it's going to be tough to convince an estate agent to let you rent a property. It will set alarm bells ringing."

All utility firms prefer payment through standing order or direct debit - taken straight from a customer's bank account. Stepping outside the system can mean paying a surcharge as well as restricting choice on products like insurance, says Mr Newhouse.

For example, BT customers opting not to pay by direct debit or a monthly payment plan automatically incur a payment processing fee of 1.50 a month, or 4.50 per quarter.

Cash costs more

Meeting energy bills by pre-payment meter, despite paying in advance, costs about 200 a year more than paying quarterly by direct debit or online, says Helen Evans from Consumer Focus.

As for broadband, a bank account is a prerequisite for most suppliers. Even getting a mobile phone often requires a bank account as proof of ability to pay.

I have never wanted to be monitored or in a credit culture
Wayne, who did without an account for 12 years

"Ultimately it's so difficult and so expensive to exist without financial products, it's a brave option to take. People who stick to cash should have a bank account as a fall-back position. A good credit rating is today's must-have," says Mr Newhouse.

But not everyone is happy to dance to the banks' tune.

Wayne, a 42-year-old musician, says he lived without a bank account for 12 years.

It was only when he returned to university a few years ago that he was forced to open an account so he could get a student loan.

"I had no option at all. I don't like debit cards because they draw you further into the credit system. I have never wanted to be monitored or in a credit culture."

He says the only bills he pays by direct debit are broadband - because he has no choice - but for everything else, from rent to phone, he uses cash.

"Banks and large corporate entities have a drip feed culture, everything you earn, they want a chunk of it - it is one big credit jigsaw."

He says he has been charged 30 interest a month ever since he went 4 overdrawn on his 2,100 loan.

"I'm on the dole now and that means I get about 60 a week, because I have to pay 7.50 back every week - this banking cycle tries to constantly bleed you dry."

'Huge shift'

Wayne may have signed on the dotted line, but his distrust is mirrored by a growing scepticism of banks amid the recent turmoil, according to Mintel.

Man at cash point
Trust in banks has slumped

While 33% of adults trusted the major High Street banking brands in 2007, that fell to 16% by September 2008.

But does this dissatisfaction actually lead people to shun banks and start stashing cash in safety deposit boxes or under mattresses?

According to the Citizens Advice Bureau, one in 12 households - 2.8 million adults in the UK - did not have any kind of bank account in 2006.

But the number of basic accounts - designed for people who don't meet criteria for standard accounts - has steadily increased since 2003, when direct payments into banks and Post Offices became the preferred method for the government to grant benefits and tax credits.

Even with the current financial turmoil, going "bankless" these days would be a brave move, says Mr Newhouse.

"There has been a huge shift, driven by the internet and online banking, towards paying through bank accounts or direct debit over the past 10 years. Technology has reduced bank costs and simplified things for customers - it's a no brainer really."


Below is a selection of your comments.

I've had a bank account since I went to university, again for the loan. But my cheapest year without a doubt was when I gave up my debit card and spent only cash - I could see much more easily where it was going and when it was gone, there wasn't any more. Maybe I should start doing that again with the whole credit crunch thing.
CK, Edinburgh, UK

If you're an immigrant eg from the EU it's very difficult (nearly impossible) to open a bank account of any kind in the UK. If you are renting a room in someone's flat and have no electric bill in your name, you cannot open an account at any bank. Banks really only want homeowners, they use many means to let others of lesser means know they are not welcome. At the same time, you cannot have a normal life without at least a current account, so it's a vicious cycle. I solved the problem by emigrating elsewhere...
Ryan Hersling, Australia

I, for one, think a bank account is pretty much a necessity, especially with everything it can do nowadays. Who wants to go to the Post Office each month and pay bills in cash when the money automatically leaves your account via direct debit? And online banking is an absolute godsend, so much easier to transfer money to people or pay bills etc. I, like most people, am too busy to have to worry about what needs paying and when, I think it's a lot more convenient to have one.
Nicky, Spain

The business of making you *identifiable* is the most extraordinary. People seem to get suspicious when you don't have something like a bank account, or a credit card, or a passport. Kind of "what are you hiding?" mentality. I hit this in an unusual way the other day. Trying to hire a van for some furniture moving on Saturday, I first of all couldn't actually make a reservation on the website as I don't have a credit card. Then when I phoned to do it instead, and checked what ID they'd need, I had to tell them I don't have a modern driving license (the ID card type). The next answer nearly vexed them, as I don't have a passport. Had I not had a work ID card with piccy, they'd have had me marked as undesirable. Are we too dependent on the modern ways and conveniences, I wonder?
SB, York, UK

You can not live EASILY without a bank account. My partner can not get a bank account at the moment due to having lost his passport and other items of identity you need to open a bank account. Luckily I do have a bank account, and as a labourer for a family firm he can be paid cash-in-hand.
Hanna Fellows, Hastings, East Sussex

A few years ago I was away at a conference when my bank made a mistake and cancelled my debit card. My cheque book was at home, meaning that despite visiting the branch and producing various IDs I was not able to access my account. It was quite frightening - I only had about 3 in my purse, knew no-one nearby to borrow money off and was stuck miles from home. I explained all this to the bank but they claimed there was nothing they could do and it would take seven days to get me a new card. It really made me realise how vulnerable a bank account makes you.
L Matthews, London

I recently spent over a year with no bank account. It's easy to adapt, but oddly you have more freedom once you have one again.
Anonymous, Birmingham

I have never, ever, ever trusted banks or any sort of financial services. Yet I do have a bank account, I work and need to get paid. I also pay utility bills, broadband and the like by direct debit as the banks have a stranglehold on the market. You either pay outrageous fees or submit to their way of doing it. I always check my bank transactions. Most months there are inaccuracies and funnily enough it is never in my favour, always the banks. I am not suggesting that we all go back to having jam jars on the mantelpiece with different pots of money in order to budget. But we do need to get back to a position where the banks SERVE their customers, and don't just see us as cash-cows.
Jo Hughes, Aberdeen

Jo - I'm staggered that you have problems with your bank statements "most months". I've been with a few different banks over the years, and everything has always matched. If it is an on-going problem, and the branch can't help you, then you should ask them for a leaflet about the FSA and your rights to complain.
Rob, London

Your Mr Newhouse seems to be equating a bank account with a good credit rating. This is untrue. I own my home, no mortgage, I do not have any debts/loans. I pay all bills promptly as soon as I get them. My bank account never ever goes into overdraft. I have no credit rating as I owe nothing. In fact when I tried to open another account with HSBC (despite having had one with an subsidiary ever since it started and HSBC for five years previously), I was told that I had no credit rating and no credit references so it could not be opened.
Malcolm Langley, Wrexham, Wales, United Kingdom

A lot of factory jobs still pay cash-in-hand, and a lot of landlords don't mind accepting cash if you want to rent a room. A lot of mobile phone companies allow you to buy a phone in cash and subscribe to a pay as you go tariff (again paid in cash) that gives you internet (and sometimes even TV) access. It is perfectly possible to live without a bank if you know how.
NK, Leics

The short answer is, you can't, and you probably shouldn't try - today, life is difficult to impossible without the paper trail that a bank account provides.
Rob Church, Bristol

I am more than happy to continue to keep my money in a bank as it will be safer than the earlier posters cash. That is now sitting under his mattress for someone to steal, now that he has posted his details on the web.
N Hart, London

Companies should have more options for payments. The system in Japan, whereby you can pay by taking your bills to a local convenience store, is a good one and circumvents the need for debit cards, is a good one, and makes working in a cash culture easy.
Charlotte, Yamaguchi, Japan

Charlotte, you can do that in the UK at shops which have Payzone or Paypoint. I don't use them personally to pay bills, but I do buy my season ticket for the tram using Paypoint at my local Spar.
Helen, Manchester

It's ridiculous to say that banks are "teetering on the edge of collapse" and "looking more like a liability than a secure home". Such sensational speculation is untrue and adds to the impression that things are all but over for our way of life, and society in general as we return to a feudal age of devil take the hindmost. Things are unpleasant, and many people have become victims of their own greed, but with each of us supporting the banks to the tune of 16,000 it must be time for the media to move on...
Jono, London


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