Choosing a bank account for your benefit payments

To receive Universal Credit and other benefits, 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. That way, you can choose an account that’s suitable for you or check whether the one you have is OK.

Which accounts can receive benefit payments?

You will need to have an account that can receive automated payments.

The different options are:

  • Current account
  • Basic bank account
  • ‘Jam jar’ account (also called a rent account or a budgeting account)
  • Some types of credit union account
  • Post Office® card account, and
  • Prepaid cards

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.

Setting up payments for rent and other bills

Ideally your account should also allow you to make automated payments out of the account – such as Direct Debits or standing orders – for bills such as rent, gas and electricity.

Only these accounts allow you to make outgoing automated payments:

  • Current account
  • Basic bank account
  • Jam jar account, and
  • Credit union account

The Post Office® card account and some prepaid cards do not allow you to make outgoing automated payments.

What does each account offer?

Services and features Current account Basic bank account Jam jar account Post Office® card account Prepaid card
Accepts Universal Credit and other benefit payments Yes Yes Yes Yes Yes
Accepts other forms of income, such as wages from work Yes Yes Yes No Yes
Allows Direct Debits and standing orders Yes Yes Yes No Not always (check with the provider)
Overdraft facility Yes No No No No
Cash card with PIN for cash machine Yes Yes Yes Yes, but can only be used at the Post Office Yes, although you may be charged
Debit card Yes Sometimes No No Most prepaid cards can be used in all the same places as a debit card
Cheque book Yes No No No No
Credit checks needed when you open the account Yes No No No No
Fees and charges Fees and interest on overdrafts. Charges for refused Direct Debits No fees Monthly fee around £5-£15. No other charges No fees Charges vary. Can include fees for set-up, to top-up, & for withdrawing cash

Current accounts

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

  • They have all the features you might need, such as automated payments, cash cards, debit cards, Direct Debits and cheques
  • You can access most current accounts through a high street branch, online, using mobile banking or over the phone
  • You can get regular statements to help you keep track of your money
  • Some accounts charge high fees and interest if you go overdrawn, and most have bank charges if there’s not enough in your account to cover a Direct Debit or standing order

Fee-free basic bank accounts

If you don’t have access to a standard bank account, a fee-free basic bank account can make it much easier to manage your money. These accounts don’t have an overdraft facility, so you won’t be able to get into debt by spending more than you have.

Want to find out more about fee-free basic bank accounts? We’ve pulled together a collection of guides, tips and handy links to make sure you get the best deal.

Jam jar accounts (also called rent accounts and budgeting accounts)

With a jam jar account, you divide your account into different ‘pots’ or ‘jars’. Typically, there are different pots for bills and spending 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.

Some jam jar accounts consist of a basic bank account linked to a prepaid card. So your wages and benefits are paid into the account. You decide how much you need to set aside for bill payments then put the remaining money onto the prepaid card for spending.

Most jam jar accounts come with budgeting advice and support provided online or over the phone. They help you set up the account and decide how much money you need to set aside for bills and other outgoings each month.

  • The advantage of a jam jar account is that you can be sure that when rent day (or bill day) comes, the money will be there to cover the payment
  • You may be able to arrange text alerts to warn you if your balance is running low
  • You might have access to advice on managing your money
  • The disadvantage is that these accounts charge a fee – usually £5-£15 a month – however, you might decide that it’s a price worth paying if it means you can avoid missed payment charges and overdraft fees

If you’re interested in opening a jam jar account, and you rent a council or housing association property, it’s a good idea to speak to your landlord or council. Some social housing landlords and local authorities are making arrangements with providers (such as your local credit union) to offer these types of account and these often have lower fees or they pay the fees for you.

Alternatively, you could try your local credit union - see below - to see if they offer a jam jar account. Or run an internet search for ‘jam jar accounts’ to see what’s available and compare fees and services.

Credit union accounts

Credit unions are ‘not-for-profit’ community organisations that are mainly set up to offer savings accounts and loans to their members. Some of them also offer current accounts that allow you to receive electronic payments and set up Direct Debits and standing orders. Some credit unions are also developing jam jar accounts.

  • Credit unions can be an option if you’ve had difficulty opening an account with a bank or building society
  • They don’t offer overdrafts, but you might be able to apply for a loan. They encourage you to only borrow what you can afford to repay
  • Not all credit unions offer bank account facilities, and there may not be a credit union where you live – so this is not an option for everyone
  • Credit union jam jar accounts usually have a monthly fee but this is often fairly low

If you’re in Northern Ireland, find a credit union via one of the following two links:

Post Office® card accounts

Post Office® card accounts are specifically designed for receiving benefits and pension payments.

  • Once the account is open, your benefit payments are credited directly to your account
  • You can’t get into debt as there is no overdraft facility on the card account
  • You can only withdraw cash or check your balance at a Post Office branch – not at any other cashpoint
  • You can’t use the account to receive wages from work or other payments
  • You can’t use these accounts to set up automated bill payments such as Direct Debits and standing orders. This will be even more of a downside under Universal Credit because you’ll be responsible for paying your own rent

Prepaid cards

Although it is possible to have your benefits transferred onto a prepaid card, there are a few things you need to be aware of before going ahead.

  • Prepaid cards come with a variety of charges. You will need to check with the provider before you buy
  • Having all your money on one card doesn’t allow you to keep your money for bills separate from your money for spending
  • Not all prepaid cards allow you to set up automated bill payments for your rent, gas or electricity. This can mean having to withdraw large sums of cash each time a bill needs to be paid

However, they do have some advantages:

  • You can’t get into debt as there is no overdraft facility on a prepaid card
  • It’s possible to make one-off electronic bill payments with some prepaid cards, giving you control over when the payment is made

One way of using a prepaid card is to operate it alongside a bank account. You leave enough money to cover your rent and other bills in your account and load all of your spending money onto the prepaid card. This gives you control over how much you spend and means you avoid bank charges and penalties on your account for returned standing orders or Direct Debits.

Choosing the best bank account for your needs

Comparison websites are a good starting point if you are trying to find a current account or basic bank account that’s right for your needs.

We recommend the following websites for comparing bank accounts:


  • Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision
  • It is also important to do some research into the type of product and features you need your bank account to offer
  • Find out more in our guide to comparison sites.

Joint or single account?

If you’re married or living together, you will get a single Universal Credit payment for your household. You will be asked to nominate which bank account you want to have your money paid into and this can be:

Opening your bank account and setting up bill payments

If you’re not sure how to go about opening an account, watch our video – How to open a bank account.

Read a transcript of this video

Customers can now switch their current account in seven working days. To find out how to switch your account, follow the link below.

Action plan – How to switch bank accounts

If you want to know more about setting up Direct Debits and standing orders see our video - How to make payments from your bank account.