Choosing a bank account for your Universal Credit payments Changes to benefits 2013

Summary: Choosing a bank account for your Universal Credit payments. To receive Universal Credit, you'll need to have a bank or building society account, or an account with an alternative provider like a credit union. Here we explain the options available and the pros and cons of each one.

Types of account

To receive your Universal Credit payment, you will need to have an account that can receive electronic payments. The different options are:

  • current account
  • basic bank account
  • 'jam jar' account (also called a budgeting account)
  • some types of credit union account, and
  • Post Office® card account.

If you are renting from a social landlord, check whether they recommend a particular account - if so, you don't have to use it, but some landlords will pay you an incentive if you do.

What different accounts offer

Current account - most people use a current account with a bank or building society to manage their day-to-day money.

Basic bank accounts - have most of the same features as a current account, such as a card to withdraw cash, and Direct Debits. The main difference is that they don't provide an overdraft facility.

Jam jar account - or budgeting - bank account, you divide your account into different 'pots' or 'jars'. Typically, there are different pots for spending and bills and there may be a pot for saving too. You decide how much money goes into each pot by working out how much you need for your bills and how much is left over for spending or saving.

Credit unions - are 'not-for-profit' community organizations that are mainly set up to offer savings accounts and loans to their members. Some of them also offer basic bank accounts that allow you to receive electronic payments and set up Direct Debits and standing orders.

Post Office® card accounts - were specifically designed for receiving benefits and pension payments. There is no overdraft and you can only withdraw money from a Post Office - not from a cash point.

The curse of the overdraft

Of course overdrafts can be very useful, possibly providing an interest-free means of using credit. It can be useful if a payment into our account is a day or 2 later than expected and withdrawals have already been made. However overdrafts can mean we become comfortable with debt, and find ourselves permanently living in our overdraft, extending the limit. As such it becomes harder to budget effectively and can lead to significant debt problems. It may well be worth speaking with a professional debt advisor to explore options for dealing with it.

(Source: some material from Money Advice service)

The above is provided as information only. does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts.