Are Self-service Bank paying in machines safe?

Do you worry about paying your cash into a self service machine?  Well maybe you should be !!

A legal loophole is leaving bank customers who use self-service paying-in machines at risk, experts warn.  The machines, which require customers to post cash using an envelope, do not issue receipts – meaning there is no legal right to demand it back if the cash goes missing.  Hundreds of people a year are denied compensation by their bank after claiming they have lost money deposited in their account this way, says the Financial Ombudsman Service.

If cash is lost or stolen when staff members count it at the end of the day, the bank can deny it ever existed since there is no evidence of how much was paid in.  According to the Financial Services Authority (FSA), customers have little legal protection if their money goes missing and the acknowledgment slip is the only proof they have.

James Daley, editor of Which? Money, adds: ‘If banks are not willing to provide a guarantee, then they should be putting signs up at the machine warning customers.’  Customers who lose their money in this way can complain to the Financial Ombudsman Service, but only half of all complaints it received last year were upheld.

All six of the banking groups have introduced new machines which count the cash and provide proper receipts, but not all branches have them.

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Bank’s Savings Compensation Scheme

piggybankFollowing the collapse of the Icelandic banks Kaupthing and Landsbanki, the Government raised the amount of savings protection for individual savers from £35,000 to £50,000 in October last year, which would be paid through the Financial Services Compensation Scheme (FSCS).

Instability has racked the UK banking industry since September 2007 with the nationalisation of Northern Rock, part-nationalisation of Lloyds Banking Group (including HBOS) and RBS, the collapse of Bradford & Bingley and the bailout of Alliance & Leicester by Spanish bank Santander.

Maximum compensation limits (and how to make the most of it)

All of your savings are covered up to £50,000 by the FSCS as long as they are not all held with the same savings compensation licence (see link at the top of the page). The limit on joint accounts is £100,000. These limits do not apply to money held with National Savings & Investments or Northern Rock where all of your money is 100% guaranteed by the Government.

Foreign banks compensation limits

These limits do not apply if your bank is a foreign bank operating in the UK with a higher compensation limit in its home country. For example, as of September 2008, the deposits of the Post Office and Irish banks operating in the UK such as Anglo-Irish Bank, Allied Irish Bank and Bank of Ireland, are 100% covered following an increase in compensation from the Irish government.

Essential advice: spread your savings

Due to the rule on different savings accounts with one provider, it is best to spread your savings over as many savings institutions as possible. Yet a series of mergers, takeovers, joint ventures and subsidiaries has created a confusing web for savers to negotiate. And this would have huge implications were your savings provider to go bust. If you had three accounts with the same banking group – which does not have separate compensation licences for each of its brands – instead of getting three compensation claims of £50,000, totalling £150,000, you would only get back £50,000. However, if the bank is separately authorised by the Financial Services Authority then you would get a separate compensation limit.