Card One Banking now allow direct debits

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Card one account holders, who pay £12.50 a month plus fees to hold the basic account, were previously unable to set up guaranteed regular payments, despite the fact that most utility providers only offer their cheapest rates to customers with a direct debit set up.

The development brings managed accounts from Card One closer to being more like a standard bank account, although the company tagline "we are not a bank!" remains.

Managed direct debits

As is the case with other managed account providers, Card One Banking's accounts, including the new direct debits, will be closely watched over by the company.

Card One characterise this as "enhanced security".

"Any direct debits set up on the customer's account will have to be fully authorised by the customer, either by logging in online or by calling the contact centre," if enhanced security is turned on, they advised this week.

That's a contrast to how direct debits are normally set up, just directly with the company that takes the regular payment.

Card One say that, as with regular payments currently, customers will get a free text message if there are insufficient funds in their account to pay a direct debit and when it's paid.

Poor credit option

Text messages are, however, one of the only free services with the managed account.

Spending in shops with the account's card is free but taking money out in cash at an ATM costs £1.50 a go, funding the account through Post Office bar code costs £1 and a balance enquiry by text costs 15p, for example.

The account is split into two sections - a card account, which holders can take cash or make payments out of, and a billing account, which the bills are paid out of - and moving money between the two means fees on a sliding scale.

£5 to £249 from the card account to the billing account costs £5; the top fee, for more than £1,000, is £30 for every transfer.

All these fees are on top of the £12.50 a month (£17.50 a month with two debit cards) fee for holding the account.

Standard and basic bank accounts offer the same things for free.

But many consumers find themselves blocked from those free to use bank accounts either because they have a poor credit history, particularly a bankruptcy in their pasts, or another problem, for example having been part of a financial fraud.

Many also choose to go with a managed provider, rather than a bank, because they fear high overdraft fees elsewhere.

Card One advertise their service as charging no fees for bounced payments.

Poor credit premium

Excess fees for services like basic banking form what many refer to as a 'poor credit premium', a series of extra costs that those on the lowest incomes are forced into.

A study released in February calculated that households with poor credit history could be spending as much as £1,170 more every year as a result.

They'll spend £110 a year more on energy bills, the study's authors argued, because they're unable to access cheaper 'fixed price' tariffs.

Dark side of debits

Direct debits can themselves be problematic, however, consumer groups have warned in the past.

Many end up keeping debits on their accounts that pay for services they no longer use, like gym membership, insurance products or website subscriptions.

Some believe that unseen direct debits cost consumers thousands of pounds a year.