While it’s thought that consumer debt levels in the UK have declined slightly in recent times, there’s no doubt that they remain uncomfortably high at present.
An estimated 8.3 million people in the UK are currently unable to pay off their debt mountain in the current climate, for example, and this is indicative of an economy where wages continue to stagnate while inflation and interest rates soar. With so many people struggling to manage their debts, it’s little wonder that managed bank accounts have become so popular throughout the UK.
But what exactly are these entities, and who have they been designed to help?
What are Managed Bank Accounts, and who are They Aimed at?
In simple terms, bank accounts are a highly ordered and structured version of the typical current accounts found on the high street. As the name suggests, this structure enables service providers to manage the account holders’ incomings and outgoings on their behalf. At the same time, they implement certain restrictions that allow for responsible money management, helping individuals to rebuild an ailing credit score and construct a more secure financial future. This offers an insight into the purpose of managed bank accounts, which have been designed to suit customers with a poor, chequered or non-existent credit history. This is why banks will usually work with you to set an agreed amount of income that is protected each month, in order to cover the cumulative cost of bills and loan repayments.
The amount left over is available for regular spending, although service providers will often apply a nominal charge for cash withdrawals as way of challenging existing financial behaviours (we’ll have a little more on this later). This can provide huge assistance over time, particularly in terms of teaching invaluable money management skills and reinforcing the importance of responsible spending.
What are the Pros and Cons of Managed Accounts?
The benefits of managed accounts are fairly self-explanatory, as they help people with poor or limited credit histories to bridge the gap between their current circumstances and their future financial objectives. This also offers an insight into the importance of the service that they provide to customers in the real-time economic climate, with so many households drowning in debt and lacking the necessary tools to minimise or repay their burden. Even on a fundamental level, it provides people with the worst credit scores with access to a functioning bank account, providing the first step on the ladder towards a brighter financial future.
In terms of the cons, customers will have to pay a small monthly fee for a managed account. This is fair given the time invested in organising your finances while it generally offers good value over time, but it can be a little off-putting for individuals who are already struggling to make ends meet. This can also be problematic when combined with cash withdrawal charges, but there are some providers that offer better value than others. Take Think Money, for example, which do not charge a cash withdrawal fee and are generally among the most cost-effective options on the market.
This is an important consideration, as by comparing the market and choosing the right provider of managed bank accounts customers can at least get the best possible value for their money.
Sources: bbc.co.uk / investopedia.com