Why do banks need you to have 2 Direct Debits?

Trinovantes

Hi Folks,
My 22 year old son has just left Uni and got a job. He wants to open a Santander 123 account, but to get the full benefits he has to have 2 Direct Debits. Why is this? He lives with us and has no bills or outgoings that require a DD. Any explanation will be appreciated.
Thank you.

HappyMJ

Set up a couple of charity donations. Or set up a savings account that can be funded using direct debit. There are ways around it. He could also get a credit card and set up a direct debit to pay it off in full each month.

eskbanker

To answer the question of 'why', it's because these banks (who offer decent interest on their current accounts) want to incentivise people to use them as their main bank account, rather than just using them for savings. Imposing conditions like DDs and minimum monthly funding makes it harder (but far from impossible) to 'misuse' these accounts for purposes they weren't intended for....

Zanderman

Trinovantes wrote: »

Hi Folks,
My 22 year old son has just left Uni and got a job. He wants to open a Santander 123 account, but to get the full benefits he has to have 2 Direct Debits. Why is this? He lives with us and has no bills or outgoings that require a DD. Any explanation will be appreciated.
Thank you.

As eskbanker says above, the explanation is simply that the bank wants you (or your son in this case) to open an account that will be his main current account.

But because they attract people to the 123 account with the 3% interest rate they know people may just use it as a 'savings' account with the 3% interest.

So to put off 'savers' and attract active current account users they ask for two DDs a month - which is a crude 'proof' that the account is being actively used.

The 'proof' isn't always appropriate (in your son's case he has no bills etc so won't have such DDs). But, appropriate or not, those are the rules.

And the 'proof' isn't really proof either - as it is easy to set up DDs of your own (if you have the time and patience) that fulfil the formal requirements but aren't actually bills.

If your son wants to set up monthly DDs the easiest way is to pay two charities a £1 each month - but that's money lost.

Slightly more effort - but keeping the money - he needs to use savings accounts that allow DDs (not SOs) - a Tesco Bank Saver Account is easy to open and set up for this, and so is, I think, a Post Office Saver. Both can be done online, with the DD set up to take 1.50 or so each month - which he can just pay transfer back in to 123 periodically.

dr_adidas01

Why because Santander have decided that's what the terms and conditions of having the account to get interest will be, its nothing personal.

Can't he open a tesco savings account and a post office saving account and use the direct debits from these for £1 each as these would then be qualifying direct debits to get interest on the 123 Account.

Archi_Bald

Trinovantes wrote: »

He lives with us and has no bills or outgoings that require a DD.

If you don't already have a 123 yourself, may be your son could pay some of your DDs from his 123 whilst he lives with you? All the ones that attract cashback, such as council tax etc..

Though it would be very simple to set up a couple of DDs in his own name, as has been outlined by others.

Trinovantes wrote: »

Any explanation will be appreciated.

The explanation is simple - it's the T&Cs of the account. If they do not suit, may be one of the alternatives will, such as Tesco or TSB.

tizerbelle

He's 22 - I would lay odds on him having a mobile and the default for those tends to be payment by DD and even if its not, they generally don't refuse changing to DD payment. So that's one DD sorted.

The other, set up the Tesco/Post Office savings account as mentioned earlier

SnowTiger

Zanderman wrote: »

Slightly more effort - but keeping the money - he needs to use savings accounts that allow DDs (not SOs) - a Tesco Bank Saver Account is easy to open and set up for this, and so is, I think, a Post Office Saver. Both can be done online, with the DD set up to take 1.50 or so each month - which he can just pay transfer back in to 123 periodically.

Tesco Bank is a good option because you can fund it using several Direct Debits. IIRC the Post Office account only allows one to be set up. But that's not an issue in this case.

Another alternative may be PayPal, which can be funded by Direct Debit. Unfortunately the process appears to be a manual one, which would have be be done every month.

badger09

SnowTiger wrote: »

Tesco Bank is a good option because you can fund it using several Direct Debits. IIRC the Post Office account only allows one to be set up. But that's not an issue in this case.

Another alternative may be PayPal, which can be funded by Direct Debit. Unfortunately the process appears to be a manual one, which would have be be done every month.

The process is indeed a manual one, but would not have to be done every month for the Santander 123 account, which merely needs 2 active direct debits. So a PayPal DD would work, as long as it was used at least once a year