Has Caxtonfx got FSA security?

The_stingemeister

Or has any of those similar travel cards got it?

Don't fancy lumping, say, 2k with them to see them go bust and have no protection!

ferf1223

none of the pre-paid cards do in the end I don't think.

There may be protection if the company itself goes bust (I know there is with FairFX - the money is held by Newcastle Building Society and is held as client funds so can't be touched if FairFX go bust)...so safe if FairFX goes bust. But if Newcastle Building Society go bust, there is no protection.

I assume it's similar with Caxton.

sofamous

Yes, the caxton FX card does provide FSA protection - the money is held with Newcastle Building Society in a client money account. If Newcastle goes bust the money is safe from creditors. All prepaid cards that use Newcastle have this protection. :T

ferf1223

sofamous wrote: »

Yes, the caxton FX card does provide FSA protection - the money is held with Newcastle Building Society in a client money account. If Newcastle goes bust the money is safe from creditors. All prepaid cards that use Newcastle have this protection. :T

I think you are wrong - I think that if Newcastle goes bust there is no protection. That's what the T&Cs said when I got my FairFX card. I remember becuase I had asked FairFX before I put any money on one of their card if the funds were safe and I got a lenghty email from them explaining that the funds were held in a ring-fenced client money account and so were safe if they (FairFX) went bust. So I was most surprised to read the T&Cs when I got the card...when I asked, it was explained that if FairFX go bust the funds are safe...if NBS goes bust, they are not.

ferf1223

Right - here you go.

http://www.moneysavingexpert.com/cards/prepaid-cards

This type of card has some great strengths, it's useful for budgeting, you can’t spend more than you need, it's easy to obtain and you can have as many as you like. Yet as well as the fee complexity there are some other things to watch for:

• No protection if the bank goes bust.
  Money held in a current account is protected by the Financial Services Compensation Scheme in the event that the bank went into default (read Savings Safety guide). With prepaid cards, there's no such protection, so while I’m not warning against them, don’t use them to store all your cash; instead load it up with what you need to spend, and no more.

sofamous

The financial services compensation scheme kicks in if the bank (or other financial institution such as insurance company or investment company) goes bust AND there is no money in the client money account for whatever reason (fraud, usually).

Newcastle issues prepaid cards under an E-money licence, not a banking licence. An e-money licence requires considerably less "capital adequacy" (money that belongs to the bank, not customers) than a banking licence BUT they are required to hold client money just as safely and are restricted in the investments they can make with client money (Just as a bank is).

So if the e-money issuer fails and they have been keeping client funds separate from their own (which they are required to) then the clients get their money back. The FSCS is only there as a very very very last resort. Never say never, but in the current climate, any bank or building society that is not keeping client money safe and separate will have been picked up by the FSA and rapped heavily over the knuckles already. The fact is that nearly all claims for FSCS compensation have arisen from investment companies (such as Keydata or Madoff) where money is specifically not held in segregated client money accounts.

The short answer is that there are always risks to placing your money with someone else. If you don't trust anyone then keep it all in cash under your mattress.

dzug1

sofamous wrote: »

The short answer is that there are always risks to placing your money with someone else. If you don't trust anyone then keep it all in cash under your mattress.

Where of course there is a fair risk it will be stolen

Or your house burns down. Or the dog chews it up.

Nothing is risk free.

sofamous

You might like to insure your house against fire and theft - but then again, if the insurance company goes bust then you are lost.......

ferf1223

Interesting...I found the part of the T&Cs from the FairFX card (I'd emailed FairFX about it so had copied down the exact wording, in this case, of Clause 17):

The Prepaid Card is an electronic money product and although it is a product regulated by the FSA, it is not covered by the Financial Services Compensation Scheme. No other compensation scheme exists to cover losses claimed in connection with the Prepaid Card. This means that in the unlikely event that Newcastle Building Society becomes insolvent your funds may become valueless and unusable and as a result you may lose your money.

FairFX's reply was along the lines of 'if NBS goes bust it will take several months you'll know about it in enough time to take your money out'...nothing about it being safe in this case as you describe, which seems odd if there were a further way to put the customer's mind at ease.

Perhaps I've been given poor information which I'm repeating, but the T&Cs of the FairFX card seemed to clearly indicate that there was no protection for the funds held on these cards in the event that NBS went bust.

sofamous

ferf1223 wrote: »

...in the unlikely event that Newcastle Building Society becomes insolvent your funds may become valueless and unusable and as a result you may lose your money.[/I][/B]

The operative word here is "may" - both Newcastle and Fair are hedging their bets and giving one possible doomsday scenario. It all comes down to whether the client money has been kept as safe as it should be. If it's not then there is no last resort of the FSCS. The same will be for all the other prepaid cards that Newcastle issue.