Managed bank accounts are sometimes known as supported banking and they were designed specifically for people who have a poor credit history or for those who have difficulty in managing their money.
What a managed bank account does is essentially to take over control of your finances – your incomings and outgoings. They can be a good idea for some but before you take the plunge and sign up for one here’s what you need to know first.
How They Work
In return for a monthly fee the money you pay into the account is divided up into two separate and distinct sections. You must agree that a specific amount will be ring-fenced to pay for your most important commitments like housing costs, utility bills and any loan repayments. Any money that is left over after essential bills are paid is made available for you to spend and this is the figure you will see on the screen when you visit an ATM to withdraw cash. Money which is ring-fenced for essential payments won’t be included in your available balance; in other words you won’t be allowed to access this at all.
Advantages of a Managed Account
If you know you are poor at budgeting your finances and frequently get into debt then a managed account can offer peace of mind knowing that your essential bills are being paid on time.
With a managed account you will most likely be offered a debit or prepaid card which you can use at ATMs (you will often be charged a fee at the ATM) or in shops. As with other types of bank accounts you will get online banking and text messaging options (sometimes for a fee) and customer service over the phone. Some, like Thinkmoney, offer credit facilities after a set period of time, usually 3 months.
Most of these accounts don’t offer overdraft facilities or cheque books and most pay no interest on monies in your account. You may not like the idea of paying a fee to access your cash. Although managed accounts are outside of the mainstream banking system they are protected to a certain extent under the Financial Services Compensation Scheme but this doesn’t apply to prepaid cards. There is no fraud protection either so this is a major point to consider for those who may suffer with Alzheimer’s or mental health issues.
An alternative could be to simply have 2 bank accounts with one specifically for essential bills.