What do you need to know about customers on Universal Credit?

Many of those customers being moved onto Universal Credit are not familiar with banking products and services and some will be using them for the first time. Here are a few key facts you might find useful in your work as a member of staff in a bank or building society.

No bank account

Fact

  • Up to 1.3 million potential Universal Credit claimants do not currently use a transactional bank account.
  • Around 60% of those people who don’t have a bank account have previous negative experiences of bank charges.

(Source: Department for Work and Pensions and the Chartered Institute of Housing)

Why this matters

Anyone claiming Universal Credit will need to have a bank account (or similar) in order to receive their payments.

Many of these customers will be unfamiliar with the basics of choosing, opening and managing a bank account.

Don’t use Direct Debits

Fact

  • Many of those people being moved onto Universal Credit will not be currently using Direct Debits to pay bills.
  • There are about 700,000 people of working age with a Post Office Card Account. (These accounts can only be used to receive benefits and withdraw cash. They don’t let the account holder receive other forms of income or set up automated payments to pay their bills.)

Why this matters

The housing costs element of Universal Credit (help with rent) goes direct to the customer who has to arrange their own rent payments. They are going to be encouraged to set up a Direct Debit for their rent and other essential bills.

Many of these customers will be wary of Direct Debits because they feel they will lose control over their money or because they have previously incurred bank charges because of refused Direct Debits. They will need support to manage the timing of the Direct Debits and avoid refused payments and bank charges.

Not used to monthly payments

Fact

  • Most people who claim benefits and tax credits budget on a weekly or fortnightly basis.
  • It’s been estimated that over 3m Universal Credit customers will struggle with their finances as a result of monthly payments.
  • Two-thirds of people claiming benefits and tax credits say they regularly run out of money before the end of the month.
  • Many Universal Credit customers are worried about running into debt.

(Source: The Payments Council and the Department for Work and Pensions)

Why this matters

Universal Credit is a single payment that is paid monthly (in arrears).

For those who run out of money one or two days before their next weekly or fortnightly payment, there is a risk that – with monthly payments – the period of time without money will be longer and more difficult to get through.

Therefore, some customers will need support to move to monthly budgeting, pay their bills and stay out of debt. All new Universal Credit customers will be offered personal budgeting support from the government. This could include advice on managing money or more frequent payments for those who can’t manage monthly payments.

If you think a customer needs help with budgeting, you could suggest that they do one or more of the following

  • Use the Money Advice Service Budget planner to work out their monthly income and outgoings.
  • Call the Money Advice Service Helpline on 0800 138 7777 and one of our advisers will be able to go through the budget planner with them and give them other money advice.

  • Ask for budgeting support at their local Jobcentre Plus.