Why is it so hard to open a retail bank account in the UK?

One of the reasons you might have opened this article is because you have either heard or found that opening a UK bank account is anything but straightforward. If there is one arrival formality guaranteed to take you to breaking point it is trying to open a High Street Bank Account. By High Street I am referring to the likes of HSBC, Lloyds. Barclays etc, the big banking institutions that have dominated our towns, cities and villages over the last couple of centuries.

For as long as I have worked at BritBound, which is over 10 years as I write, opening a bank account has always been a challenge. The main reason I have been given by the head banking honchos, is that because there are no fees the banks make a loss when they open an account for you. But they do this because they no that through overdrafts, loans, mortgages, credit cards and fees they will make money. But if you are here on a two-year visa then it is highly unlikely you will require or even be eligible for these additional services. So therefore the bank is not really too excited about making it easy for you to get an account.

And how they make it difficult is by requiring you to have proof of a UK address, and by proof they mean and official document such as a utility bill or council tax letter. None of which you will have if you are flat sharing. And you can’t get your own flat easily because you don’t have a bank account or credit history! So it’s a hair pulling situation!

What are the biggest banks in the UK – we often talk about the ‘big four’ banks in a country. In the UK they are:

• HSBC- The initials stand for the Hong Kong and Shanghai Banking Corporation and it’s origin can be traced back as far as 1866 when it was formally incorporated, to Hong Kong. Though in its most recent incarnation is as a British bank established in London in 1991. In 2018 it remains the largest banking group in the UK and is the 7th largest in the world. HSBC has its headquarters in London and around 3,900 offices in 67 countries with around 40 million customers.

• Barclays - with more than 300 years of History Barclays has quite an interesting and colourful story. A British bank founded in 1690 and also the worlds first bank to have a cashpoint machine which was deployed in 1967, the photos show what an event this must have been! It has its headquarters in London, around 80,000 employee,s operates in 55 different countries.

• Lloyds Banking Group - Lloyds bank was founded in the UK on 3 June 1765. In 1995 it purchased TSB and became known as LloydsTSB. (it has since separated). In 2009 LloydsTSB purchased Halifax and Bank of Scotland (known together as HBOS). In 2003 the TSB part of Lloyds was sold off and it became just Lloyds Bank again! It operates in 45 other countries and employs around 45,000 people.

• Royal Bank of Scotland Group (RBS) - The Royal Bank of Scotland was founded in Edinburgh in 1727. It is one of the biggest banks in Scotland and has acquired many smaller banks in its history. In 2000 it took over Natwest Bank and became the second largest banking group in the UK, after HSBC.

Different types of banks and banking solutions

In the last few years, the British banking sector has changed dramatically, to the point where it can be very confusing to understand the types of banks available to you. If you have just arrived, or are moving from Australia, New Zealand, Canada or in fact anywhere, you will soon experience the frustration of UK banking!

In terms of opening an everyday account it is really only the following types of banks that will be of interest to you.

• Retail Banks- also known as High Street or consumer banks, these are the typical mass-market ‘bricks and mortar’ banks in where individual customers can visit local branches, which are typically based in areas with high foot fall such as High Streets, but also in more isolated towns and villages, (though with the increase in online banking fewer branches exist in more rural locations. The services they offer range from current and savings accounts, debit/credit cards, mortgages and personal loans.

• Electronic Money Institutions (EMI’s) (Digital Banks) – An EMI provides all its banking facilities online and is both set up and managed through an app platforms whichcan be accessed on mobile and tablets. EMI’s do not have physical bricks and mortar branches and their services are provided using automated processes and supported by live-chat and in app messaging / email. Examples of EMI’s are Monese and Revolut. As they are not registered banks with the FCA you cannot call them bank accounts. But you won’t notice much difference as it looks and feels like a current account.

• Building Society- In the United Kingdom, building societies actively compete with banks for most consumer banking services.There is little difference except that Banks are companies that are usually listed on the stockmarket, and hence are owned by, and serve the interests of their investors, i.e. their shareholders. Building societies on the other hand have no external shareholders, they are owned by, and serve their customers.

• Challenger Banks - A challenger bank is one that’s smaller and newer than a traditional bank they are basically new banks trying to knock the old ones off their perch! The vast majority began after 2014 and plan to compete with the big mainstream banks such as HSBC, Barclays, RBS and Lloyds. Challenger banks are taking advantage of opportunities that the big banks have been neglecting because of their size, market dominance and older technology systems. Most of the new challenger banks are Electronic Money Institutions, but there is quite a success story for Metro Bank which now has over 80 branches in the UK.

What are the different types of UK bank accounts available?

• Current Account -A current account is a bank account that give you access to everyday banking services, such as receiving your salary, paying your bills, transferring money to other people and setting up direct debits and standing orders. A current account suits anyone who wants constant access to their funds. It will give you a cash and/or debit card and a chequebook (yes these still exist) and may also have an agreed overdraft facility (essentially a form of credit should you need it).

• Pre-paid current account- Prepaid current accounts are comparable to current accounts, in that they offer the same everyday banking facilities., the difference is that you can only spend the money you have in your account. There is no overdraft facility so you can’t get into debt! This is how the Electronic Money Institutions work in that your Visa or Master Debit Card only works if you have money in your account. Which could be a good thing as this means you can never get into debt! You might find that some services won’t accept a pre-paid card for direct debits or standing offers.But this is changing as their use becomes more widespread.

• Basic Account– it is common for someone with either no credit history (this will be you when you first move here) or bad credit to be offered a basic bank account when they apply at a retail bank. This is a bank account but without any access to savings accounts, overdraft, credit cards, personal loans or mortgages.But you do still get on-line banking and have the ability to set up direct-debits, etc. So really it is a no-frills account and can be more than adequate for when you first get here.

• Savings Account– A savings account is a bank account but it is a place you put your money to receive interest in the hope that your money will increase over time based on the interest rate. The money stored in a savings account is accessible though some accounts might put limitations on this access to help you save.

• Joint Account– this is a shared account, something you’d normally open with your partner if you were in a long-term relationship. If you have shared bills to pay then it makes sense to have these come out of a joint account. You also have the option to open single accounts too if you would prefer to have your own account as well.

• Business Account– if you are thinking about setting up a limited company to take advantage of the lower tax rates then you will need a business bank account. You will have this in addition to a personal account so you can keep the fund sources separate.

How BritBound can help you open up a retail UK bank account.

Being based in the UK enables BritBound to stay up to date with the different banks and their criteria for opening an account. We have had partnerships with at least 3 different banks over the years and one thing we’ve learnt is that what a bank says now regarding opening a bank account for a non UK resident can change next week!

Signing up to BritBound to get assistance with a UK bank account just means that you save time and a lot of stress! There is no joy in walking up and down the High Street trying to find a bank that will actually open you an account! There are more enjoyable things to do in your first week here!

BritBound always has a partnership with a bank which has said they can open accounts for our customers, as I write this it is HSBC and TSB. But these are always changing, it used to be Barclays and Lloyds but then they changed their opening criteria which made it impossible to open an account as someone new to the country. But who knows, things may change again!

We will be able to set you up with an appointment before you have left your home country. It is important that you read through the information in your MyBritBound portal to ensure that you meet the opening criteria and bring with you to the UK, the relevant documentation, if required. If you are unable to meet the required criteria then you can also use one of our recommended partners to obtain an e-bank or digital account.

Is there much difference between the banks - would you recommend a particular bank?

I don't think there is anything that different between them. Our partner is currently HSBC who everyone seems to be happy with. If you are only looking for general banking facilities then they all offer similar services and having banked with most of them at one point, personally I can't say I find there to be one bank to beat them all. But if you're after a particular service or function then e-mail us and we'll find out for you. Click Here to Send Email

Do I need a bank account to attend job interviews?

It’s not generally the norm to ask this of you, but it will certainly make you look a lot more work ready if you can say that you have a UK bank account and your National Insurance number is in progress. So it might show you to be someone who is taking working in the UK seriously. Anything that can make you a better choice than another candidate can only be a good thing, right?!

Why do I need a UK Bank Account?

You will need a bank account if you intend working here for your salary to be paid into. You will also find it easier to set up direct-debits to pay things like your rent, phone bills, and any other monthly recurring charge.

Can I use the bank account I already have to get my salary paid into?

It is very unlikely that a UK employer will pay you into an overseas bank account. Asides from the additional fees charged for making international transfers, it is just not something they are likely to agree to.

What monthly fees do UK banks charge?

Most of the banks have zero monthly fees on their current accounts. There will always be an option to upgrade to an account with more features and benefits with the option of paying a monthly fee to have this. But most current accounts are free to run. Fees will be charged for unauthorised borrowing, i.e. spending more money than you have in your account!

Here at BritBound we will ask you what date you would like your appointment for and it will be booked for that date or the next available one. When you go along to your appointment you can expect it to take between 60-90 minutes. If you are unable to make it along to a branch for an appointment then you should consider opening an e-bank accountinstead.

Can I open a UK bank account from overseas?

We used to have this option years ago but as far as I know you can't do this unless you pay a hefty fee. For example I know that HSBC charges £200 to open an account for you before you arrive here. But I would question why you would need to pay to do this, especially when we can open an HSBC account for you as part of our service. Lloyds used to offer an international account but I don't think that division exists and from memory you used to have to earn above £75k in order to get it.

What documents do I need to open an account?

This is the million dollar question! Every bank has different requirements, but they will ask for two or three of the following. Many of which you cannot provide, hence why so many banks are just not going to be able to help you.

• Passport
• ID document
• Evidence of your right to live and work in the UK
• Drivers Licence showing your overseas address
• Utility Bill
• Letter from your bank
• Proof of your UK address
• National Insurance Number

Can I open a bank account without proof of address?

You won't be able to open a retail / high street account but you could open an account with Monzo. You can also consider the app-based accounts offered by Monese or Revolut. What you could do is start with one of these and then open a current account with a high street bank at a later date. Once you have a National Insurance number your options are less limited as a lot of the banks will accept your NI letter as proof of address.

*** Related Article - National Insurance ***

If you are moving to London or anywhere else in the UK then you also need to apply for a National Insurance Number.

For Everything you need to know about National Insurance and more - click here.