I’m a payments expert – four ways to prepare NOW for a bank failure so you don’t get left behind
BANK outages aren’t just inconvenient, they can cost you your pocket – here’s what you need to do to protect yourself.
Bank failures are not uncommon – we regularly see businesses encountering payment issues, technical issues or system problems.
But these can cause big headaches for customers, especially if it means they don’t get paid or a direct debit isn’t paid on time.
Myron Jobson, Personal Finance Campaign Manager at Interactive Investor, said: “The thought of not being able to access your account online can be debilitating for a growing number of consumers who bank exclusively online.
“Worries about accessing money, paying bills on time and avoiding overdraft fees are among the list of concerns during a glitch or widespread outage.”
He said there are three things you need to do to protect yourself in the event of an outage:
Sometimes, with outages, it’s a particular part of the system that’s down – not the whole thing.
Having multiple ways to log into your account could help you avoid technical issues.
For example, if the website is down, you will still be able to access services through your banking app.
Or if the app is down, you might still be able to call – so store your bank’s customer service number in your phone, too.
Myron said: “If that doesn’t work, going to a branch might be an alternative option.
“But it’s rare for an outage to affect all of your access points at the same time.”
He points out, however, that apps that don’t have multiple ways to access your account — for example, new app-only stores — might leave you with fewer options during an outage.
Get a prepaid card
Having another way to make payments is crucial during an outage.
And while you might consider opening a separate bank account as a backup, Myron warns that having multiple accounts could impact your credit score.
Instead, he suggests having a prepaid debit card for emergencies.
Myron said, “There is no credit check for a prepaid card, so no risk to your credit score.”
Prepaid cards are a great way to stick to a budget, as you can only spend or withdraw the amount you’ve loaded onto the card.
They are often used by people who cannot get a bank account.
Options include Tesco Bank’s Clubcard Pay+ – you’ll need a Club Card to get one, but there’s no charge and you manage it through the Tesco Bank app.
You will also earn Clubcard points when you spend with the card.
HyperJar is also available on-app only and free of charge – but that’s only for online and in-store spending, you can’t withdraw cash from an ATM with the card.
If your bank seems to suffer from regular problems, it might be worth moving elsewhere.
Myron said: “Outages from online banks are usually infrequent – but if you find they are not, it might be worth switching to a bank that has a history of fewer outages.”
Switching banks is easy – just open a new account and give your old account details to the new bank, and they’ll do the rest.
The whole process should take around seven working days, and your standing orders and direct debits will also be transferred automatically.
You can often grab free money to change too. Currently, First Direct pays £175 to new customers and Santander offers £160.
Check the terms and conditions before changing to ensure you’re eligible for the bonus – and also be sure to consider factors such as customer services and outages.
Know your other payment options
Paying bills by direct debit is easy because you don’t have to remember to make a payment – but it’s not the only way.
When you sign up with a provider that you pay by direct debit – whether it’s your car insurance or your energy bill – it’s worth checking what other payment methods are offered.
With car insurance, for example, paying for a year up front is cheaper than paying on a monthly basis if you can afford it.
Myron said: “Most creditors also offer alternative payment options, such as online payment through their website.
“Others will accept cash at an ATM or allow you to settle debts through a PayPoint or Payzone.”
If your bank experiences an outage on the day you have a direct debit that needs to leave your account, contact the company you’re willing to pay to report the problem ahead of time.
They may be able to put a note on your account and waive the late payment fees so you don’t have to claim them later.
What if my bank is down?
If you suspect your bank is experiencing an outage, sites like DownDetector can help you check.
You can also check social media such as Twitter for announcements and its website if there is a service status page.
Banks aren’t obligated to compensate you if they have technical problems, but you shouldn’t be left behind.
If you were hit with penalties or late payment fees as a result of the outage, you should be able to claim them.
Note the date and time of the outage, and exactly how you were affected, including any additional charges you incurred.
Follow the bank’s complaint process, which you should be able to find on their website.
If you are unhappy with the outcome, you can complain to the Financial Ombudsman Service.
This is an independent body that will review your case and decide how it should be resolved.