A new bank account-style facility that is open to all – even those with a bad credit history or who have been made bankrupt – is set to launch next week. The Change Account is designed to simplify people’s finances and help them budget, but the fees are likely to be a turn-off for many.
Popping cash into jam jars to help with budgeting dates back generations, and is something the Change Account is attempting to replicate, says the man behind it, Steve Round, who aims to go live with it on Monday.
Strictly speaking, it’s not a bank account – it’s described as a “transactional account” with a dedicated account number and sort code, and comes with a prepaid debit MasterCard.
The idea is that customers are able to ringfence their cash into two wallets – for rent and utility bills, say – and know that the money left behind is there for general expenditure.
Round – who is also a nonexecutive director of Ecology building society and on the board of trustees of the Big Issue Foundation – sees it as a way for people to stop inadvertent spending. There are no penalty charges for missed or late payments, but there are usage fees: £4.25 a month for the account, £1 for withdrawals from cash machines and 50p for a direct debit paid out of the account.
Round says he is not attempting to compete with the basic accounts offered by the high street banks aimed at customers on lower incomes.
Students are on his target list, along with anyone looking for help on budgeting. “The key is being inclusive. We want it to appeal to a range of people who want transparency about pricing and help with budgeting,” he adds.
He approached the mainstream banks, hoping they would back his idea, but was turned away, so is operating the account off the banking licence of Raphaels Bank.
By the end of next year, Round is aiming to have 100,000 customers for the business, of which he owns 5%.
Some 41% is owned by Payment Card Technologies, which provides debit cards and which is, in turn, part of the Lenlyn Group, which also owns Raphaels Bank. The rest is owned by charities and community organisations – Homeless UK, PayPlan, Advice UK, Street UK and London Rebuilding Society, which Round chaired until four years ago.
Michael Royce at the Money Advice Service says it is a good idea to shop around for the best account. “This type of account is sometimes called a jam jar account. They can be useful in helping you to budget, allowing you to put money into different ‘pots’ or ‘jars’.
“You can decide how much money goes into each pot by working out how much you need to set aside for bills, and how much is left over for saving or spending. You should consider whether the benefits associated with having this budgeting account are outweighed by the costs to you in transaction charges.”
