What if your current account provider goes bust?

dag_2

Hi, I'm wondering what people are doing to prevent problems if their current account provider goes bust.

Quite a lot of the best-buy-table-topping savings accounts only allow you to make withdrawals by BACS or CHAPS into a linked current account. If the bank with which you hold that current account goes bust, then you obviously can't get your money out of the savings account until you have opened another current account, and then changed the linked account on the savings account record to the new current account.

And very often, the current account needs to be able to support cheques and/or direct debits, and possibly both; the savings provider may check this before allowing you to link it. This means that a "basic bank account" that are intended for benefit recipients and poor people, and which are supposed to be very easy to open, probably won't fit the bill.

Of course, there are some savings accounts that let you make withdrawals into any account. So, at a push, you could use such a savings account to pay your bills and credit cards, and have your salary paid directly into such a savings account, even if you temporarily don't have a current account. But that doesn't solve the problem of not being able to withdraw from other savings accounts that require a linked account.

But I figure that the only sensible way to avoid this potential problem is to maintain two or more current accounts.

How easy is it to open and operate two or more current accounts? Is there any risk that banks might close current accounts down if they don't receive a regular "income"? I guess you could comply with minimum regular deposit rules by having your salary paid into one current account, then setting up a standing order from that account into a second current account, and then have all your direct debits on the second current account.

I've just tried to open a current account with cahoot, but was rejected on the grounds that the agreed credit limit I already have with other cahoot products is too big.

Any suggestions? Thanks.

Blah99

I've posted on this topic before, if you do a search on my username. Basically if you have a current account with any of the big players (RBS, HBOS etc) you have absolutely nothing to worry about. There is precisely zero risk in any of these banks going bust and denying you access to your current account. The Government could not allow it to happen as the country would immediately go into financial meltdown. At which point you'll be more concerned about the rioting on the streets (because people can't buy food) than whether your account is working or not....

juicyjude

OMG cant be worrying about that as well. My worry list is full:eek: :eek: :eek:

dag_2

The Government could not allow it to happen as the country would immediately go into financial meltdown. At which point you'll be more concerned about the rioting on the streets (because people can't buy food) than whether your account is working or not....

Well fair point, but what we're discovering is that the FSCS £50k protection doesn't mean that you'll get you rmoney straight away. You may have to wait a while, during which time, inflation may have nibbled away that the value of your savings a bit.

And besides, banks going bust aren't the only things that get in the way of withdrawing your money. Cahoot had a power outage recently. And sometimes, people forget their PINs and/or passwords, and have to go through a bureaucratic password reset procedure. And sometimes, current accounts get frozen when ID fraud is suspected. Whenever any of these things happen, not only can you not withdraw any money from your current account, but if you rely on that current account as a linked account for any of your savings accounts, you can't withdraw any money from those savings accounts either, unless and until you've opened another one. And for some of us, that might be a problem, especially if money is tight as a result of being unexpectedly frozen into Icesave to start off with.

juicyjude

Well, the pills, booze and gun are ready to hand now:rolleyes: :rolleyes: :rolleyes:

cwcw

I was talking about this issue with someone at work. It would be a real nightmare if suddenly your salary had nowhere to be paid to and your direct debits nowhere to come out of. My current account is with HSBC though so I'm pretty confident it's safe. HSBC seem to be about the only bank still looking ok.

[Deleted User]

I have 3 current accounts with 3 banks.

Blah99

dag wrote: »

Well fair point, but what we're discovering is that the FSCS £50k protection doesn't mean that you'll get you rmoney straight away. You may have to wait a while, during which time, inflation may have nibbled away that the value of your savings a bit.

And besides, banks going bust aren't the only things that get in the way of withdrawing your money. Cahoot had a power outage recently. And sometimes, people forget their PINs and/or passwords, and have to go through a bureaucratic password reset procedure. And sometimes, current accounts get frozen when ID fraud is suspected. Whenever any of these things happen, not only can you not withdraw any money from your current account, but if you rely on that current account as a linked account for any of your savings accounts, you can't withdraw any money from those savings accounts either, unless and until you've opened another one. And for some of us, that might be a problem, especially if money is tight as a result of being unexpectedly frozen into Icesave to start off with.

Yes, but you're talking about 2 different things. If HBOS went bust the entire economy would immediately grind to a halt, which is what the Government would never allow.

What you're referring to are "point problems" - individual failures or problems that are isolated in and of themselves. Those aren't major issues. The Switch/Maestro network goes down with worrying regularity, but it doesn't stop people buying stuff - transactions can be made offline, or people can go to their cashpoint and take money out. Similarly if your account is frozen because of suspected fraud all you need to do is to go into your local branch with some ID and they'll at least sort you out with temporary cash. If there was some confluence of events that meant there was a widespread problem with financial transactions you can guarantee it would be sorted out with massive priority - this happened once in recent times that I know about.

There are ways and means around all these problems. You're right insofar as it makes sense to have at least 2 accounts with 2 separate institutions, plus a small amount of cash on hand for emergencies, but other than that it's not worth worrying about.

dag_2

Well okay, but to be honest my main concern is that I want to minimize the risk that of these "point problems" - as well as the collapse of smaller banks that might hold current accounts - getting between me and my savings.

So - does anyone know of any savings accounts that don't require you to link a current account? And does anyone know of any savings accounts that are available to those who only have a "basic" bank account that doesn't support cheques or direct debits?

So far, the only ones I'm aware of are those from Egg and Cahoot, but I'd be really grateful if anyone can list any more of them. Thanks.

CFC

I have two current accounts and have done so for the last two years. It's nice to know that I have options that don't involve scratting around in distress situations for another bank.

Can't help on the savings accounts suggestions because of this.

CluelessJock

dag wrote: »

Hi, I'm wondering what people are doing to prevent problems if their current account provider goes bust.

Quite a lot of the best-buy-table-topping savings accounts only allow you to make withdrawals by BACS or CHAPS into a linked current account. If the bank with which you hold that current account goes bust, then you obviously can't get your money out of the savings account until you have opened another current account, and then changed the linked account on the savings account record to the new current account.

I suggest if this is a serious concern causing worry then you should switch your concern to your health as you are more likely to cause health issues than suffer loss of savings through a linked account provider going bust. What do you think the holder of the deposit would do, say tough?