3 Banking Ideas For Low Earners

It can be tough to get a decent bank account if you have a low income, but you have some options. We give you three to consider.

We all want to be able to confidently look after our finances. Having a bank account is one of those conveniences which makes it so much easier. We can manage payments better and can buy cheaper goods by shopping online. However, it's not always that easy for people with low incomes to get an account, or to choose a suitable one. So here are three possibilities.

Option one: a current account

Many low-income earners will struggle to get current accounts offering good overdraft facilities. Still, I've found one interesting possibility. Internet bank cahoot offers a £100 interest-free buffer, so if you miscalculate your outgoings every now and then, you won't pay interest or obscene penalties. Unlike most banks offering this facility, it doesn't state that a minimum income is required. Also, cahoot doesn't say this account is 'subject to status'. Worth a go, I think!

Option two: a basic bank account

Basic bank accounts are designed for people with little income. They're much easier to get than current accounts, yet you can still pay by direct debit and standing order, and you can use cash machines. They could reduce your bills too, as having a bank account means you can get discounts on gas and electricity.

The Coventry Building Society CallSaveMoneyManager account may be a mouthful, but it offers the best rate of interest I could find at 2.9%, and you can get it even if you're just 16 - a mere baby! There are loads of other basic bank accounts to choose from, and we'll tell you how to find them in a moment.

Option three: Credit Unions accounts

The problem with basic bank accounts is that if a direct debit bounces, you could be charged outrageous penalties, perhaps £35 or more. Also, you get no overdraft buffer to protect you from these penalties.

A better option may soon be available through credit unions, which are not-for-profit organisations ran by the community - its members. The purpose of a credit union is to help people borrow and save money at fair rates.

The Association of British Credit Unions Ltd (ABCUL) is talking about an exciting project to bring better facilities to people with low incomes. The final details of how the accounts will operate are still being hammered out, but eight unions have already signed up. From ABCUL's July newsletter, it seems likely that their accounts will not only be available to low income households, but they'll have buffer zones if you overspend, and they won't penalise you unfairly for bounced direct debits.

Around two-thirds of us are eligible to join, so take a look at credit unions near you.

> You can compare current and basic accounts through The Fool. (Tip: to find basic accounts, run a search on all current accounts, and then use the 'Next' arrows to scroll through the list. Look for the word 'basic'.)

> Beat unfair charges! Read The Ultimate Guide To Reclaiming Bank And Card Charges.