Around one million people in the UK do not have a bank account, new findings from Consumer Focus show.

On the Margins, a new report from the group, identified that the government needs to do more to give people access to basic current accounts.

There are many benefits to having a bank account, such as setting up direct debits for household bills or using the internet to purchase goods and services.

Mike O’Connor, Chief Executive of Consumer Focus, said: “Life without a bank account can cost time, money and convenience. It is another stark reminder that those with less often end up paying more.”

He added that there is currently little focus on addressing the needs of those excluded by banking, which is in serious need of being tackled.

Last month, Consumer Focus responded to the coalition government’s agreement, saying that the needs of people who use banking services should be at the fore of any decision-making.

Senate Majority Leader Harry Reid, D-Nev., has introduced an amendment to the tax extenders bill that would extend the transaction closing date for the First-Time Homebuyer Credit from June 30 to Sept. 30.

Reid joined Sen. Johnny Isaakson, R-Ga., and Senate Banking Committee Chairman Christopher Dodd, D-Conn., to introduce an amendment Thursday to the American Jobs and Closing Tax Loopholes Act of 2010 that would extend the deadline for closing home purchases in order to qualify for the tax credit.

The current deadline for purchases made using the popular tax credit is June 30, 2010, but there is growing concern that because of the time it takes for banks to complete transactions such as short sales, many of these home purchases would not be complete before the deadline through no fault of the homebuyer.

The new year is typically when people resolve to improve their finances, but after the wild economic ride of 2009, budgeting and money management are a higher priority than usual.

Charge cards and debit cards can help consumers avoid accumulating debt and rein in free-spending, though each has pros and cons that can make a budget or break one.

“Whenever you’re going through tough economic times and certainly a recession, consumers are looking for ways that they can control their money,” says Marina Norville, a spokesperson for New York-based American Express. Since 1958, the company has offered charge cards as a way for consumers to make purchases, though they differ from credit cards in that they require consumers to pay the entire balance each month. As a result, consumers can’t fall into debt, a benefit that’s particularly relevant in light of the recession. “In essence it’s like plastic willpower,” says Norville.

Debit cards also are increasingly being viewed as a money management tool. According to a recent survey commissioned by San Francisco-based Visa, 76 percent of debit card users said the cards helped them track spending and 63 percent said debit cards helped them stick to their budgets. Since that same survey found that American consumers lose track of $1,000 a year in cash, debit cards — which leave an electronic trail of purchases — can play a role in helping people stay on top of their spending, says Visa spokesperson Kate Mulhearn.

Financial experts agree that both charge and debit cards can be helpful to consumers who are trying to stay out of debt, but more factors should be taken into consideration when determining whether either option could contribute to a more financially-fit 2010.

The case for charge
One of the greatest benefits of charge cards, made famous by American Express, is the convenience of making purchases on plastic and having one bill to pay each month. With Americans becoming more adverse to debt in the past couple of years, American Express unleashed a major ad campaign in 2009 touting the benefits of charge cards over credit cards, and is targeting twenty- and thirty-something professionals with a charge card called Zync.

“One thing we found out from this demographic is that they really want control,” says Norville. “They don’t want something that’s going to let them spend — they’re quite afraid of getting into debt.” As a result, the company is banking on the fact that financially conscious young professionals will find the no-debt policy of charge cards appealing.

While the knowledge that you must pay the entire balance each month may be enough to get some consumers to think twice before making purchases, charge cards offer other perks. “We have a number of budgetary tools that we provide our cardmembers as well,” says Norville. Services such as the company’s online Money Manager let cardholders track all of their spending and help them avoid getting into financial trouble. “If you wanted to make sure that you didn’t go over $500 a month, you can have an account alert send you via text message or e-mail letting you know when you’ve hit that $500 balance,” Norville says.

Rewards and special features such as return protection, in which American Express will in some cases let a cardholder return unwanted merchandise even if the retailer won’t, provide even more value. In addition, charge cards can help those who are on a tight budget since the payment for a product can be put off for 30 days. “It’s essentially a 30-day float for your money,” says Norville. “It’s better than debit because your money isn’t automatically withdrawn.”

But there is a potential downside. Charge cards can affect your credit, particularly if you don’t make your payment in full each month, says Andrew Grasso, a financial specialist with Richmond, Va.-based Clearpoint Credit Counseling Solutions. There’s also the risk of overspending since the money isn’t due immediately. Another con has to do with costs. “Sometimes it may not be worth it to use a charge card if they have that annual fee,” says Grasso. For example, the most basic American Express charge card (the Preferred Rewards Green Card) annual fee is $95.

Digging out of debt with debit
Debit cards have their share of pluses and minuses as well. For those who want to avoid debt, debit cards access one’s own funds rather than credit. They also have no bearing on your credit score unless you have an overdraft account that you default on. While debit cards used to have fewer protections against fraud than charge cards, many financial institutions extended their credit card safeguards and identity theft protections to debit card users. It can also be easier to track purchases with a debit card since you can request receipts or visit your account online.

But for some, debit cards may come at a cost, points out Grasso. An overdrawn checking account can lead to an overdraft fee that averages $26, according to Lake Bluff, Ill.-based economic research firm Moebs Services. The number of consumers affected by overdraft fees is likely to decline later in 2009 since new Federal Reserve rules will require consumers to opt-in to overdraft protection plans starting July 1, 2009. But those who would prefer the overdraft protection to having their purchases denied due to insufficient funds would still be subject to the fees.

Since debit cards withdraw funds directly from one’s checking account, they also require consumers to be more vigilant about how much is available to spend. And if a hold is put on an account due to a purchase that hasn’t yet cleared, that can affect your day-to-day cash availability, Grasso says.

Find the right choice
No option is perfect, and any form of plastic may cause you to spend more than you would with cash. “When you go to the grocery store with $100, you’re going to make it stretch. If you went with your debit card, it’s easy to do $110. If you go with a charge card, it’s easy to do $200,” says Grasso. “Cash is king, but charge cards and debit cards offer convenience.”

Here are 10 places and situations where it can pay to leave that debit card in your wallet:

1. Online

“You don’t use a debit card online,” says Susan Tiffany, director of consumer periodicals for the Credit Union National Association. Since the debit card links directly to a checking account, “you have potential vulnerability there,” she says.

Her reasoning: If you have problems with a purchase or the card number gets hijacked, a debit card is “vulnerable because it happens to be linked to an account,” says Linda Foley, founder of the Identity Theft Resource Center. She also includes phone orders in this category.

The Federal Reserve’s Regulation E (commonly dubbed Reg E), covers debit card transfers. It sets a consumer’s liability for fraudulent purchases at $50, provided they notify the bank within two days of discovering that their card or card number has been stolen.

Most banks have additional voluntary policies that set their own customers’ liability with debit cards at $0, says Nessa Feddis, vice president and senior counsel for the American Bankers Association.

But the protections don’t relieve consumers of hassle: The prospect of trying to get money put back into their bank account, and the problems that a lower-than-expected balance can cause in terms of fees and refused checks or payments, make some online shoppers reach first for credit cards.

2. Big-Ticket Items

With a big ticket item, a credit card is safer, says Chi Chi Wu, staff attorney with the National Consumer Law Center. A credit card offers dispute rights if something goes wrong with the merchandise or the purchase, she says.

In addition, some cards will also offer extended warrantees. And in some situations, such as buying electronics or renting a car, some credit cards also offer additional property insurance to cover the item.

3. Deposit Required

When Peter Garuccio recently rented some home improvement equipment at a big-box store, it required a sizable deposit. “This is where you want to use a credit card instead of a debit,” says Garuccio, spokesman for the national trade group American Bankers Association.

That way, the store has its security deposit, and you still have access to all of the money in your bank account. With any luck, you’ll never actually have to part with a dollar.

4. Restaurants

“To me, it’s dangerous,” says Gary Foreman, editor of the frugality minded Web site The Dollar Stretcher. “You have so many people around.”

Foreman bases his conclusions on what he hears from readers. “Anecdotally, the cases that I’m hearing of credit or debit information being stolen, as often as not, it’s in a restaurant,” he says.

The danger: Restaurants are one of the few places where you have to let cards leave your sight when you use them. But others think that avoiding such situations is not workable.

The “conventional advice of ‘don’t let the card out of your sight’ — that’s just not practical,” says Tiffany.

The other problem with using a debit card at restaurants: Some establishments will approve the card for more than your purchase amount because, presumably, you intend to leave a tip. So the amount of money frozen for the transaction could be quite a bit more than the amount of your tab. And it could be a few days before you get the cash back in your account.

5. You’re a New Customer

Online or in the real world, if you’re a first-time customer in a store, skip the debit card the first couple of times you buy, says Breyault.

That way, you get a feel for how the business is run, how you’re treated and the quality of the merchandise before you hand over a card that links to your checking account.

6. Buy Now, Take Delivery Later

Buying now but taking delivery days or weeks from now? A credit card offers dispute rights that a debit card typically does not.

“It may be an outfit you’re familiar with and trust, but something might go wrong,” says Breyault, “and you need protection.”

But be aware that some cards will limit the protection to a specific time period, says Feddis. So settle any problems as soon as possible.

7. Recurring Payments

We’ve all heard the urban legend about the gym that won’t stop billing an ex-member’s credit card. Now imagine the charges aren’t going onto your card, but instead coming right out of your bank account.

Another reason not to use the debit card for recurring charges: your own memory and math skills. Forget to deduct that automatic bill payment from your checkbook one month, and you could either face fees or embarrassment (depending on whether you’ve opted to allow overdrafting or not). So if you don’t keep a cash buffer in your account, “to protect yourself from over-limit fees, you may want to think about using a credit card” for recurring payments, says Breyault.

8. Future Travel

Book your travel with a check card, and “they debit it immediately,” says Foley. So if you’re buying travel that you won’t use for six months or making a reservation for a few weeks from now, you’ll be out the money immediately.

Another factor that bothers Foley: Hotels aren’t immune to hackers and data breaches, and several name-brand establishments have suffered the problem recently. Do you want your debit card information “to sit in a system for four months, waiting for you to arrive?” she asks. “I would not.”

9. Gas Stations and Hotels

This one depends on the individual business. Some gas stations and hotels will place holds to cover customers who may leave without settling the entire bill. That means that even though you only bought $10 in gas, you could have a temporary bank hold for $50 to $100, says Tiffany.

Ditto hotels, where there are sometimes holds or deposits in the hundreds to make sure you don’t run up a long distance bill, empty the mini bar or trash the room. The practice is almost unnoticeable if you’re using credit, but can be problematic if you’re using a debit card and have just enough in the account to cover what you need.

At hotels, ask about deposits and holds before you present your card, says Feddis. At the pump, select the pin-number option, she says, which should debit only the amount you’ve actually spent.

10. Checkouts or ATMs That Look ‘Off’

Criminals are getting better with skimmers and planting them in places you’d never suspect — like ATM machines on bank property, says Foley.

So take a good look at the machine or card reader the next time you use an ATM or self-check lane, she advises. Does the machine fit together well or does something look off, different or like it doesn’t quite belong? Says Foley, “Make sure it doesn’t look like it’s been tampered with.”

Despite back-to-back snowstorms that shut federal offices for days, the Internal Revenue Service issued new guidance last week on the two tax-credit programs that are powering the country’s real estate markets — the $6,500 credit for repeat buyers and the $8,000 first-time-buyer credit.

The new policy clarifies what documentation taxpayers need to submit to obtain either credit. When Congress revised the programs in November, it ordered the IRS to tighten its rules and monitoring to curtail widespread fraud that had emerged last year.

This included fictitious home purchases in which people received $8,000 checks from the government for transactions that had never occurred. In some cases, federal auditors found that fraud ringleaders were submitting multiple claims for credits and splitting the government payouts with people who had no financial ability to buy a house.

To avoid such abuses in the revised credit program — which is scheduled to be available for qualified purchases closed through June 30 — Congress directed the IRS to spell out documentation standards in detail and to install monitoring systems to spot fraud upfront. Among the keys to the monitoring system is that all documentation accompanying credit claims must comply with the IRS’s detailed rules. Here’s what the agency wants from anyone seeking a credit:

– A fully executed IRS Form 5405 (available at http://irs.gov) on which taxpayers provide basic information supporting their claim of eligibility, including income and home purchase date.

– A copy of the settlement statement proving that the sale and purchase transactions actually took place. In instructions to taxpayers issued last month, the IRS said the settlement statement should show “all parties’ names and signatures, property address, sales price, and date of purchase. Normally this is the properly executed Form HUD-1.”

The problem, however, is that home closing and settlement customs vary from state to state, and sometimes the HUD-1 does not contain both the seller’s and the buyer’s signatures. In escrow states such as California, where settlements are not sit-down affairs bringing together sellers and buyers, both sets of signatures might not appear on the HUD-1 received by the buyer.

In California, buyers sign an estimated closing statement or an estimated HUD-1 “at the time they sign their loan documents,” said Donna Grosso, president of the California Escrow Association. Sellers have their “estimated closing submitted to them for their review and signature during or near the same time period as the buyer. We prepare the final closing statement or the final HUD-1 on the closing date,” which is the date of recordation.
As a result, Grosso said, “we do not have the buyers or sellers available to sign the final closing statement.” This seems to create an obstacle to meeting the IRS’s instructions and makes it more likely that applicants’ claims will be rejected or delayed for special review.

The agency tried to address that issue Feb. 12 by loosening its requirements. “In areas where signatures are not required on the settlement document, the IRS has clarified that it will accept a settlement statement if it is completed and valid according to local law,” the agency said. “The IRS encourages those buyers to sign the settlement statement prior to attaching it to the tax return.

In situations where the signature of the seller is not on the settlement document, the IRS advises the buyer to still sign the document.”

Despite the fact that Form 5405 continues to require all parties’ signatures on the HUD-1 or settlement document, the agency is now essentially saying: “Don’t worry about it. As long as your settlement statement conforms to prevailing local practices, we’ll accept it.”

This could be important for large numbers of repeat and first-time buyers who are planning to file for the credit with this year’s tax returns and want to be sure they get through the IRS’s tougher standards. Nationwide, according to estimates by the National Association of Realtors, 1.5 million repeat purchasers and 900,000 first-timers are expected to apply for credits this year.

What else does the IRS want to see on claims from home buyers? For repeat purchasers, the agency wants documentation that, before their latest purchase, they had lived in their former property for a consecutive five years out of the past eight years. This may include property tax records, hazard insurance records or copies of annual mortgage interest statements filed with their federal taxes.

One caveat for filers: Because of the increased documentation and monitoring, IRS processing will take four to eight weeks. So don’t expect your $6,500 or $8,000 check overnight.