Second (easy access) account in case my bank screws up

Question

Sometimes banks screw up. At the moment I have a single login with a single bank (various accounts inside). I'm not that rich, so that's no biggie. I'm under the personal savings insurance limit, and I'm not inclined to spend my free time trying to gain thruppence a year by moving my money around.

But here's my worry. Banks screw up. I'm sure I'm legally entitled to this and that, but if I'm stuck in the middle-of-nowhere on a trip, that's no real comfort, even if it's only a temporary loss. The banks sincere apologies for inconvenience would be of even less value. (It will probably be IT, won't it?)

So what I'd really like is an account with another provider which can be used to access a small amount of money to get me out of a hole. The temptation is to hide some actual cash somewhere, but that's bad.

Banks in the UK seem to actively discourage opening accounts for this purpose and there's all kinds of hoop jumping that seems to be required to convince them it's going to be my main account.

What I really want is just some way of giving a secure institution (like a bank) some cash, around a month's salary, and then armed with a small piece of plastic and a secret code, and located in the middle of nowhere, to get the cash back. Maybe even buy something online: probably once in a blue moon.

Is this a good idea? What's the best way to go about it in the UK if it is?

Update: note that this situation seems to be rather specific to the UK. You basically have to defeat the intent of a number of hoops that banks here put in place to avoid multiple current accounts. It probably doesn't amount fraud, for example "moving your money around" each month, but it seems close to it. I'd rather not do that

Answer 1

In the UK, banks discourage you having a current account (i.e. one on which you can get a debit card / access money via an ATM) that is not your main account, i.e. the one into which your regular income is deposited.

That is because it costs them money to provide those facilities and if they’re not getting income from you to invest then it doesn’t make sense to provide them for free.

I would say you have three options:

1. Open a second current account with a different bank (ideally a bank in a different banking group, as an outage that affects one may affect others in the same group) and accept that you have to pay a monthly fee to maintain this account. This should not be difficult or require jumping through hoops.
2. Open a savings account with a different bank. This will not give you a debit / ATM card but may give you instant access to the money via online banking.
3. Take out a credit card with a different provider from your bank account. Again, there may be annual fees (although likely less than current account fees). You can use the card either to pay for things directly or to withdraw cash at an ATM; with most credit cards you pay interest on cash withdrawals immediately, but you can counterbalance this by transferring money to the card via online banking.

I think option 3 comes closest to what you want - it gives you access to some money in an emergency situation and also doesn’t tie up any capital. This is what I do - I have a main current account with linked debit and credit cards, and then I have two other credit cards as backup options if needed.

Answer 2

Frame challenge

It’s easy to have multiple accounts with multiple banks without jumping through hoops.

1. Halifax offer a current account with no monthly fee and no minimum pay in requirements.
2. Nationwide offer a current account with no monthly fee and no minimum pay in requirements.
3. Barclays offer a current account with no monthly fee and no minimum pay in requirements.
4. HSBC offer a current account with no monthly fee and no minimum pay in requirements.
5. NatWest offer a current account with no monthly fee and no minimum pay in requirements.

Pretty much every major UK bank or building society offers a free, no minimum payment, current account. Here is a fantastic guide to the various accounts available (scroll past the first section about switching to to the section with account that pay decent interest). These accounts are offered for free as a loss leader, in the hope you’ll use the overdraft facility or purchase other products from them. However there are basic bank accounts that are good if you don’t want an overdraft facility or have a poor credit score.

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I think you may be getting confused with many of the switch incentives offered to encourage you to leave your current bank and switch using the switch guarantee scheme. They often come with conditions like paying in a minimum amount and have at least two direct debits. Some people try and open multiple accounts and have money moving between all of them to get the new customer benefits from multiple banks. These requirements about direct debits and monthly pay in are purely to qualify for the rewards, not the account. You’re not trying to switch your main account to get rewards so you don’t need to worry about this.

You simply need any current account that has no monthly fee, such as the ones linked above.

Answer 3

Second Bank Account

As far as mainstream financial institutions are concerned, the simplest course would be, as RonJohn suggested, to just open an account with another bank: either one of the major high-street banks (NatWest, Lloyds, etc.) or one of the "second-tier" banks/ex-building societies (Tesco, Santander etc.). The majority of "screw-ups" in recent years have been specific to a single bank (or banking group), so the chances are good that if your day-to-day account is affected, your back-up account won't be.

Contrary to the OP's fears (and those of some other answers), there does not appear to be any great hurdle to having a second, basic, current account in the UK. I was going to edit in some examples, but Notts90 covers this far better in their answer. Meeting extra requirements (like two or more Direct Debts, and/or a minimum deposit every month) may get you benefits such as interest on credit balances or cash-back on spending, but are not a requirement for many basic accounts.

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Emergency-Use Credit Card

The processing networks for credit cards (Mastercard/Visa) are substantially different from normal UK banking (BACS/Faster Payments) so glitches that affect one bank, or even the much rarer glitches that have affected the underlying banking infrastructure will probably not affect credit-card payments.

The obvious advantage of a credit-card is that you do not have to "tie up" any money "just in case". You can spend (up to your credit limit) at time of crisis and repay the balance once things have returned to normal. Even if you have to repay in a couple of installments (and thus incur some interest charges) or need to make a cash withdrawal (incurring appropriate fees), this may be an "acceptable cost".

As asgallant suggested in a comment, an alternative to a normal credit-card would be a Pre-Paid Credit Card. These might be useful if you either have a poor credit-rating or – as the OP mentions in a comment – if you have not built much of a credit-rating. The down-sides of a pre-paid credit-card (compared to a normal one) are that you have to "tie-up" the money in advance, and you may have to watch out for fees (see "How much do prepaid cards cost?" in this Money Saving Expert article, particularly the mention of Inactivity Fees).

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Some other more "off-the-wall" ideas that you might pursue (after fully evaluating the risks):

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PayPal

While PayPal is most often used to pay merchants, or to transfer money to others, it is possible to add money from a linked bank account to your PayPal wallet (see PayPal Help: How Do I add Money to my PayPal Balance). You could thus pre-load your account with however much money you think you'll need to ride out any bank glitch. You can obviously use the money for online purchases, and while you cannot normally access it through an ATM¹, you could potentially send part of the balance to a friend/relative who does have ready-cash.

Note, that like Gift Cards (below), any balance held in a PayPal account is NOT protected by the Financial Services Compensation Scheme (FSCS). Were PayPal (or a gift-card issuer) to go bust, you would be at the back of the line of creditors and be unlikely to get much, if any, money back.

¹You can get a PayPal Business Debit Mastercard which – from what I can see – acts as a "normal" Mastercard, backed by your PayPal account. This does allow withdrawal of a PayPal balance from ATMs (with a flat £1/withdrawal fee), but is only available with "business" PayPal accounts in the US and UK (but the card can be used worldwide).

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Amazon (or other) Gift Card

This would not be a viable solution for many people, and certainly not for large amounts of money.

Amazon (and, undoubtedly, other major retailers) allow you to load a gift-card on to your account. While Amazon doesn't (yet) sell everything, it may be enough to ride-out the occasional glitch with your main bank. Probably the main drawback is that according to their Terms and Conditions, "Gift Cards cannot be used to purchase other gift cards", so you could not send some of the balance to another person (e.g. as a way of getting cash). However, if you have a credit card attached to your account, you probably would be able to purchase a gift-card on that, that you could send to a friend.

As both Owain and Notts90 rightly point out in comments, a gift-card carries the risk of the issuer going bust and not being able to honour it (as happened to a somewhat-similar "Christmas Club" run by Farepak in 2006, and to a number of other UK high-street retailers over the past few years such as Woolworths, BHS and Toys-R-Us: see this Centre for Retail Research list for many others who have been in trouble).

If you were to pursue this idea, it would probably be best to follow the suggestion Chris H gave in a comment of limiting exposure to cover essentials and diversifying across a number of major supermarkets.

Answer 4

I'm amazed none of the answers so far have mentioned Monzo.

You can open an account entirely using its mobile app – you just need to be able to take a picture of your photo ID, and record a 3-second selfie video to demonstrate that it’s really you and you match your photo ID. There are no branches, the account is entirely managed via the app.

Let's go through your list of requirements:

all kinds of hoop jumping that seems to be required to convince them it's going to be my main account.

• nope. No hoop jumping whatsoever, just download the app and request to open an account. I suspect the hoop-jumping may be an artefact of an older-fashioned approach to banking – or, as Notts90’s answer points out, to get a switching incentive.

a secure institution

• it is a UK bank and is covered by the FSCS (the compensation scheme covering you for up to £85,000 if the bank fails), if that’s what you mean.

armed with a small piece of plastic and a secret code, and located in the middle of nowhere, to get the cash back.

• easy; withdraw at any Link ATM – including in foreign countries, where withdrawals of up to £200 in any 30-day period are fee-free, and the exchange rate is the same as the MasterCard base exchange rate with no markup. (Foreign cash withdrawals in excess of £200 in a 30-day period are subject to a 3% fee). Re: “secret code”, unlike with other banks that send your PIN by post, you decide what your PIN is going to be before the card is sent out to you.

Maybe even buy something online: probably once in a blue moon.

• no problem; you get a MasterCard debit card, and the receipt / statement shows up instantly within the app.

Is this a good idea? What's the best way to go about it in the UK if it is?

• If you go with Monzo the only ‘overhead’ to all this is having the app on your phone. You really can do everything, including the account opening, all via the mobile app.

Answer 5

This sounds a whole lot like, open a current account at a separate bank, and carry its debit card with you too, in case of emergencies. That's easy peasy in every county that claims to be free, and most that aren't.

Alternatively, carry a credit card for emergencies like this.

If it's not what you're talking about, then please edit your question for clarity.

Answer 6

Not so good in the middle-of-nowhere, but Nationwide Building Society still offer passbook savings accounts (if you open the account in branch). Others may do too.

That may offer additional protection against computer failure, as you may be able to withdraw limited amounts of cash against the passbook from a branch.

Answer 7

If you're wanting to ensure access to money (via card and/or cash), a bank account might be overkill. The simplest solution would be to get a prepaid debit card and load it with however much money you need. You can use it everywhere you'd use your normal debit/credit card, and many will let you withdraw cash at an ATM. I actually keep a couple of prepaid cards stashed away (enough to cover a week or so's expenses) for just that reason. When compared to the hassle of opening a bank account, setting up a prepaid card is effortless (I actually had more trouble buying replacement blades for my razor than I did the prepaid card).

The downside to this approach is that these cards usually have fees associated with them, but it's usually possible to find one that's reasonable. The ones I normally see charge a rather small flat fee when initially purchasing the card plus an ATM access fee of a dollar or two if you're "out of network", but no fees for adding funds or spending via debit. Some will try to nickel-and-dime you to death, though, so check the account details before purchasing.

Answer 8

Another option allowing access to cash (but not spending on plastic) is a post office "savings" account (scare quotes because the interest rates are pitiful). This is an old-fashioned approach but can be run completely offline if you like.

Answer 9

The multiple options I use... are (1) open a second bank account (as a joint account in my case) with a different organization, make a standing order to pay from bank account #1 into bank account #2 and pay fixed bills from bank account #2, such that there's always a sufficient balance in bank account #2 to cover emergencies, (2) have a pre-paid credit card with enough money on it to cover a tank full of fuel and a bit more... (3) have a couple of ordinary credit cards and (4) have a partner who does their personal banking with yet another banking provider.

(1) doesn't charge me as money goes into both accounts once a month, they both think I'm being paid into their accounts (2) I lose interest on no more than £100 (3) Making sure that I have a Mastercard and a Visa card (4) Okay, they are not always with me but if I'm really stuck they'll come and rescue me.

I'm in the UK too... I opened the bank accounts before the regulations got so tightened up but (2) and (3) and (4) are perfectly legit for anyone. Oh, and of course you can add PayPal (limited usefulness for cash) and some cash stashed securely and you can always take something to 'cash converters' or similar or sell something to a friend in dire emergencies.