Unknown banks 14 February at 9:40PM in Budgeting & bank accounts 14 replies 808 views

Jodalzell

I know that I could do better in terms of my savings accounts interest rates and every week check Martins best buys.

But I am put off by banks I don't know. Should I be? Is there anything to worry about?!

Thank you in advance and I apologise if this is covered in another thread, I couldn't find such information anywhere!!!

fourmarks

As long as the banking institution you choose to use is covered by the Financial Services Compensation Scheme (FSCS) then your money is protected up to a limit of £85,000  (£170,000 for a joint account). So if the institution goes bust then your money, up to that limit, will be reimbursed. There is no difference in coverage between the well known banks and those that you may not know of.


At the bottom of each MSE table of 'top accounts' you will find confirmation that the products are covered by the FSCS.

lr1277

My understanding is any mortgage/loan you have with said instituion is also taken into account.

Say you have savings of £85k and a loan of 50k, if the institution goes bust you get £35k back (85-50).

I don't know what happens if you have more than £85k but the loan brings the amount with the institution below £85k.I imaine you get the savings minus the loan, but am not certain.

mab3000

lr1277 said:

My understanding is any mortgage/loan you have with said instituion is also taken into account.

Say you have savings of £85k and a loan of 50k, if the institution goes bust you get £35k back (85-50).

I don't know what happens if you have more than £85k but the loan brings the amount with the institution below £85k.I imaine you get the savings minus the loan, but am not certain.

I don’t believe this is correct. Cannot find anything on the FSCS website that says anything you owe the bank is deducted from the compensation you’d receive if the bank went bust. Nor had I ever been told this was the case in the years I worked for a bank through training

Rob5342

You can check if you are covered here:

https://www.fscs.org.uk/check/check-your-money-is-protected/

Like mab3000 I can't see anything to say that a loan or mortgage offsets your compensation.

StrictGold5208

Never heard of the mortgage being taken into account, if a bank went bust I assume the debts and mortgage would be sold to another bank.

Zanderman

lr1277 said:

My understanding is any mortgage/loan you have with said instituion is also taken into account.

Say you have savings of £85k and a loan of 50k, if the institution goes bust you get £35k back (85-50).

I don't know what happens if you have more than £85k but the loan brings the amount with the institution below £85k.I imaine you get the savings minus the loan, but am not certain.

Agree with others that I don't think this is the case. 

But even if it was it makes no net difference. In this example if you had £85k in the bank but owed the same bank £50k, your net assets in that bank are only £35k anyway.  There would be some inconvenience as you'd have to re-align how your finances are set-up, but it would be no net change.

But, as said above, I don't think it works like this anyway, the loan or the mortgage would still exist and just be moved elsewhere.

Back on topic:  yes OP the banks you haven't heard of are fine as long as they are covered by the Financial Services Compensation Scheme and that's easy to find out, as fourmarks says above, on the MSE 's comparison tables.

lr1277

mab3000 said:

lr1277 said:

My understanding is any mortgage/loan you have with said instituion is also taken into account.

Say you have savings of £85k and a loan of 50k, if the institution goes bust you get £35k back (85-50).

I don't know what happens if you have more than £85k but the loan brings the amount with the institution below £85k.I imaine you get the savings minus the loan, but am not certain.

I don’t believe this is correct. Cannot find anything on the FSCS website that says anything you owe the bank is deducted from the compensation you’d receive if the bank went bust. Nor had I ever been told this was the case in the years I worked for a bank through training

Apologies. Apparently I mis-remembered the situation.
I thought I read this many years ago as I discussed it with my parents at the time.
However the only mention I can find of this now is in relation to offset mortgages in an article for ‘This is money’.
As I am on a tablet I can’t post a link at this moment. However when I am on the computer again and manage to find the link (not always guaranteed), then I will post it.
Sorry for any confusion/

Here is the link I mentioned:
https://www.thisismoney.co.uk/money/mortgageshome/article-7908539/I-mortgage-savings-bank-goes-bust.html

Band7

Jodalzell said:

I know that I could do better in terms of my savings accounts interest rates and every week check Martins best buys.

But I am put off by banks I don't know. Should I be? Is there anything to worry about?!

Thank you in advance and I apologise if this is covered in another thread, I couldn't find such information anywhere!!!

Why are you put off by them?

Perksy5

I think at this point banks are very similar with features or benefits overlapping, not many have USPs anymore.
As long as they are FSCS protected go for it. You could spend days on this forum hearing about why you should avoid Bank A when someone else has had no problems with them, but Bank B on the other hand...
We all have different needs and priorities, whichever floats your boat give it a try and run it for some small spending before you do a full switch to 'try before you buy' as it were.

Jodalzell

Band7 said:

Jodalzell said:

I know that I could do better in terms of my savings accounts interest rates and every week check Martins best buys.

But I am put off by banks I don't know. Should I be? Is there anything to worry about?!

Thank you in advance and I apologise if this is covered in another thread, I couldn't find such information anywhere!!!

Why are you put off by them?

I think it's just something I have always thought. Has felt odd to bank with a name I don't know, but its not necessarily logical!
Am very reassured by what everyone has said re fcs.