Thursday, July 16, 2009

Setting up a UK bank account and applying for a credit card - a long and arduous process

For newcomers to the UK, it's quite a hassle to open up a bank account. I know, because I went through a long and arduous process getting mine. For those looking for some tips, you might like to read on how you could set up a UK bank account. However, it is primarily written for Singaporeans but I guess it can be a reference to others as well.

Credit+CardFinally, after days (or even weeks) of haggling with the bank's staff, you finally got your account up and running, only to realise that there is a daily limit on how much you can draw from your debit/savings card. Typically, HSBC imposes a £300 daily withdrawal limit at cash machines. Someone told me that she was able to draw more but I have yet to verify that.

I guess most of us would need to draw on our credit account every now and then. That's when the real problem comes in. Unlike back in Singapore, UK banks don't hire packs of promoters to prowl the high streets with brochures encouraging shoppers to apply for credit cards. In fact, there's absolutely no incentive to apply for any specific credit cards (i.e. no tie-ups and thus no discounts with any merchants). The only reason why you are applying for one card and not another is perhaps the lower interest rate, and that is applicable if the debt is rolled over.

The application approval itself, which is solely dependent on the individual's Credit Rating, is another headache. I know of someone, who seemingly has a clean credit record, has been denied of a credit card since she stepped in London four years ago.

There is no central information on how this Credit Rating comes about or how it can be improved - one can only guess. You can of course engage a whole host of services to check on your ratings (just Google for check credit ratings and viola!). If you think it couldn't get any worse, there is this rumour going around that your rating will actually dip with each check conducted.

How was your experience setting up bank account and applying for credit cards in the UK?

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11 comments:

drcrab said...

Hi CK!
the 300 pound daily withdrawal limit is something set by the banks - not just for people new to the country. I've had this 300 pound limit since I've been here 13 years ago, and so has my husband (who's been here forever!). You can apply to have a higher withdrawal limit though, and if you really need to draw out more money you can get it from the cashier. this is just a limit at the machines, I think.

credit ratings and credit record in this country depends on the amount of debt you have, and also the number of years you've lived at a certain place. If you think about it, if you've only lived in one place for 6months-1 year and keep moving, it doesn't 'bode well' for one's record. Also, if you've never chalked up debt, it's unlikely you're a 'good customer' because you won't be able to make money for the banks! I know people who've owed 20K over a few credit cards and yet still get given credit cards based on the 'belief' (some may call 'fallacy') that these people are good customers because they will earn interest for the creditcards/banks. Of course that fallacy has been a significant factor in leading us into this dismal economic situation in the first place!

as for that 'rumour' - it's true, of some credit ratings company. the idea being - the more times your name gets checked (doesn't matter that it's you checking on yourself), the computer will flag you up as someone whose name's been checked. The assumption is that you are therefore attempting to get more credit cards... therefore credit ratings go down. there is some logic in that madness BUT...that doesn't make it less frustrating.

I was rejected for a credit card once, because I wanted to apply it in my maiden name (since all my bank statements, household bills, paychecks etc are in my maiden name). I was told that since there was a discrepancy in my name (as it appears in the electorate poll - because that's my married name), I couldn't have that credit card. I had wrongly assumed that because I had all the good credit history in my maiden name that it would make sense to apply in my maiden name. I had wrongly assumed that since I didn't have any credit history in my married name, having a credit card in my married name was not going to work. bah!

SheR. said...

Oh I was lucky CK. Got my bank account and job at Barclays (because my boss saw me at the branch). Then through that same account, I got a credit card with 500 pounds limit. Easy peesy.

sixmats said...

Getting a credit card in Japan is a hassle too.

Actually, using banks here is a hassle.

Fëanor said...

when i first got here, it was so difficult to get a bank account in my name that we figured we might as well add me to nina's; but then barclays said that her own facilities like the credit and debit card would be withdrawn because they didn't know what my rating was, so we abandoned that attempt. finally after weeks of going to one bank after another, lloyds allowed me to open a very basic checking account - with an ATM card, not even a cheque book. sort of defeated the purpose, eh? it was a bit easier in the US, because often your employer would 'sponsor' you at a local small bank; once you established yourself with that bank, you really didn't need to change it unless you moved to another state.

C K said...

@drcrab,
I was referring to the limit for withdrawal per day not just for newcomers. Then again, I am not sure what's the point of that with debit cards; any person with the card and pin could go around swiping the card as well.

Without a proper id card, it's quite hard to track people down over here. As such, one's address plays an important role here, so much so that people have gotten into trouble because the previous tenant have chalked up huge debts before they left.

Well, I am still hanging on to a card from back home as using UK credit cards' usage in Europe will require additional charges.


@SheR,
Really? Lesson learnt, to get an bank account, apply for a job in the bank. :)

@sixmats,
So how do you go about doing it in Japan? But I supposed it would be a hassle for foreigners in every country to set up one, wouldn't it?

@Feanor,
I'm surprised. I would imagine that the employer's sponsorship over here in the UK would suffice, no?

SheR. said...

CK. I didn't apply for a job. My ex-boss just chose me from the crowd lining up at the branch! Hahaha

Fëanor said...

Ah, but I was unemployed for 3 months when I first got to the UK; by the time I was employed, I already had the Lloyds account. I'm not sure employer sponsorship even exists here - although if we show we have a regular job, no bank should deny us an account, eh?

C K said...

@SheR,
Got that. Will go prance around outside Bank of England tomorrow. Might just do the trick!

@Feanor,
For us, we have an existing relationship with HSBC back in S'pore so it's a matter of internal liaising on the bank's part. But gosh, even that was an agony for us.

drcrab said...

well that's what I said - I've been here for so long and my husband's british and yet we both have 300 pound limits. Not sure why..!

in the UK, your gas bill is your method of identity!!! (unlike at home where we have the IC at 12 and updated one at 18 and then again..!)...

in Japan, I don't remember how bad it was to get a bank account but I do remember quite abit of a hassle! Since I had no clue about bank interest rates (and since when I was there, interest rates were at near 0% anyway) I went for the bank that'll give me my Hello Kitty Credit card - that was cool...(either that or a Doraemon one)...hehehehe....

Anonymous said...

I had no problem setting up a UK bank account as I had a HSBC account in SG, so I merely presented all the relevant documents. I had a Credit card issued at the same time, there was a problem with the Pins of the credit card and I have since cancelled it. In terms of daily withdrawal limits, the £300 is for withdrawal from ATM, you could withdraw more at the counter. In UK, it is NOT advisable to carry much cash, you are encouraged to pay with your debit card at most places (retail and restaurants), so cash is really for small sum transactions.
My subsequent bank acount is easily done by bringing along the details of the first account. Identification documents include passport, gas/water bill, council tax bill and bank statements.
The interesting thing about bank accounts and credit cards in UK is that you arent supposed to have many, but there is a different between banks and building society so you could explore having different accounts with these.
One other consideration is to maximise your saving and lower your tax exposure by investing in Cash ISA, where the interest is tax free, and you keep rolling the interest and principle, enjoying compound interest.
There are some credit cards that offer rebates, you have to look out of the promotion, they are NOT as attractive as in SG. Yes, I still keep a couple of my SG cards and would use them when I am travelling enjoying better rewards and not incurring unnecessary charges. Hope the information is useful. Cheers DW

C K said...

@drcrab,
I guess you would have to go up the limit then. :)

I figured out the significance of bills after trying to rent a place. References include prior bills as well.

@Anon,
Heard about Cash ISA but have not read up about it as yet, shows how clueless I am, isn't it? But thanks for the heads up.

One thing about SG credit cards is that some do impose a yearly fee after the initial honeymoon period, you might want to look out for that too. I had to call them and request for a waiver, which they did after much persuasion as I didn't really use that card.