MoneyMagpie

Apr 14

Alternatives to Bank Accounts

Sales of safes are on the rise as people are pulling their cash out of their bank accounts to stash it in their homes. The Moneymagpies firmly suggest that you don’t pull your money out of your bank account. As long as you don’t have more than £50,000 in one financial institution you’re covered by the Financial Services Compensation Scheme so you don’t have to worry.

Plus,  inflation will go up towards the end of this year and so if your money isn’t earning any interest you are effectively losing money because your cash will gradually buy you fewer things and therefore be worth less.

However if you’ve lost all faith in the banks here are the ways you can manage your money without putting it in the hands of your local bank manager.

Better be safe than sorry

The original and classic place to stash your cash is in a safe. Before cast iron safes were cheap enough for the average man on the street to buy, people used to store their cash in wooden boxes. Unfortunately, these were easily accessible to all, all you needed was an axe.

However, today cast iron safes are affordable and secure. The standard variety can be installed in basements and cellars and bolted to a concrete floor. They don’t have to be huge vaults, a small security safe can fit on a shelf in your office and cost as little as £39 including delivery.

However if you want the serious stuff to protect your cash, you can easily spend thousands. A medium sized safe is more reasonable at £299 and hopefully big enough for all your cash.

Other safes are a bit more cunning. Many are designed not only to keep your cash safe, but also to keep it hidden. This small items safe fits in the wall and looks like a plug socket – enough to outwit even the cleverest of thieves. Alternatively, try a tiny safe that looks like a can of Heinz tomato soup. You can stash it in your larder and no one will be any the wiser.

Safe deposit boxes

Safe deposit boxes are essentially mini-safes with the added bonus of the high-security protection provided by your bank or safe deposit company. Storing items of value or cash in these boxes carries significantly less risk than storing them in your own home and the bank or company who store them will also be jointly liable should anything be stolen.

You can store anything in them you like and you have full privacy, so no one else has to know what you put in there. At Metropolitain Safe Deposits in London there are different sizes of box ranging in price from around £125 per year for the small boxes (50x280x229mm) up to as much as £2,065 per year for the largest (640x610x458mm).

You can rent a box that only gives you access, or choose a deal that will allow access for yourself and your family. Rent is usually paid annually or quarterly.

If the bank in which your box is stored fails, your cash is safe. This is because it is simply stored by the bank, not invested. It is physically in the building rather than just a few numbers on a spread sheet. So if the bank folds, you just go in, empty out your box and put the contents elsewhere. The only thing you may lose is your rental payment.

Turn your cash into assets

Although storing your cash in a safe deposit box protects it from thieves, it does not protect it against inflation and you could potentially lose a lot of money if your savings are just  sitting in the box untouched.

Get around pesky inflation by converting your cash into assets by buying things that will retain or hopefully grow in value.

During a recession, the popularity for buying gold goes through the roof. This is because it is viewed as a stable investment:  people will always want gold. You can actually buy gold bars and store them in your house, a safe deposit box or the facility offered by the company you purchase them from.

You can buy gold online from sites like Buillon Vault.  Jasmine has blogged about the ins and outs of buying gold – read what she’s got to say here.

Another fairly safe bet for investment is oil. The price of oil has been falling recently, but it is a finite resource which means that as supplies dwindle, the price of it will rise. You can buy commodoties like oil as part of an Exchange Trade Fund – get more info in our full article here.

Investing in property might not seem like a good idea considering the recent drop in house prices. However, with many willing to slash their asking prices in order to secure a sale, and mortgage rates low for those with a good size deposit to put down, now is a good time to buy.

The housing market will recover eventually, but until it does your cash will at least be invested in an area that will track inflation. Once we have got through this tough economic time, you’ll be able to sell off your property, hopefully for a tidy profit.

See our guide to getting a housing bargain here.

If you don’t have enough cash for big investments, there are purchases you can make a bit closer to home that should help you retain the value of your cash. Designer clothing is a favourite for many. Classic pieces from brands like Yves Saint Laurent, Chanel, Vivienne Westwood and more actually grow in value the longer you own them. The key is to think simple and classy, don’t pay out for crazy neon colours and huge shoulder pads that are unlikely to come back into fashion later on.

You can increase value by buying a collection of items from one designer and then selling all the pieces off at the same time. The best think about this investment is you can enjoy wearing them as well as keeping the value of your cash.

Toys are another big area for alternative investment. Classic dye-cast toys, like Hornby trains and Corgi cars, are extremely popular and change hands frequently at large auctions. You can invest in a collection and then sell it on later, hopefully at a profit. Items like vintage teddy bears are also extremely popular as they date from a very specific time in history and few remain as they are easily damaged.

More modern toys like comic books and action figures also grow in value, but only if they are in absolutely pristine condition. See our full article on collecting action figures here. The hottest modern toys that are set to grow hugely in value are Urban Vinyl figurines. These each have an individual piece of artwork imposed onto an action figure, each of which is unique or manufactured in very small amounts, raising its value. Prices range from a few pounds up to hundreds. You can see some examples of these toys here.

With all assets, there is no guarantee that the value will go up: risk is inherent when investing. However these are some of the more reliable options before you hit the stock market full on.

Offset mortgages

Possibly one of the most practical things to do if you do not want to store your savings in the bank is to put them into an offset mortgage.

Offset mortgages bundle up your current account, savings account and your mortgage into one product. This means that any credit in your current or savings accounts is ‘offset’ against your mortgage.

If you’ve got lots of savings you will pay less interest on your mortgage if you get an offset deal, because your savings are technically paying off a chunk of your mortgage. However if you need money, you can still access your savings as they still technically belong to you and not the bank.

If your bank goes bust, you won’t lose your savings as they will be encorporated into the part of your house you own.

Offset deals are a bit more expensive than fixed rate mortgages simply because they are more flexible. However they are good for lots of people.

Go prepaid

If you don’t have a huge amount of savings, but you still don’t want any of your cash in the bank you can opt for a prepaid credit card.

These are just like normal credit cards and are accepted almost everywhere when you are spending. However the fundamental difference is that these cards do not advance you money – you have to top them up with funds before you spend, just like a pay-as-you-go mobile phone.

You can do this online by transferring money, or you can top up at a paypoint using cash. However, it is becoming increasingly popular for people to have their salaries paid directly onto the cards cutting out the need for a bank account.

At Moneymagpie we like the Kube Prepaid Mastercard, mostly because it has a great online facility that lets you pay bills and transfer money onto and off of your card without the need for a separate current account.

For more information about prepaid cards see our full article here.

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WHAT DO YOU THINK?

2 thoughts on Alternatives to Bank Accounts

  1. I think one of the best and most popular methods in this day and age is the Prepaid Card! Cards like the paysafecard are easy to get, easy to use and most importantly there is no hassle. There are no hidden fees, percentage rates to deal with, there is no overdrawing charge, there are no shocks at the end of the month- you sinply pay with what you have! For anyone that doesnt know this method, check it out- you will be surprised how nice shopping online can be!




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  2. Prepaid cards are an excelent option if you can’t get a normal account. Otherwise, don’t see the point, you are giving your money to an entity to profit from it and they charge you commisions for almost everything:

    Prepaid Card Purchase £14.95
    Monthly Management Fee £2.99 per month
    Additional Card £9.95
    Internet Registration £0.00
    Minimum Initial Load £15.00 (minimum to open your account)
    Domestic (UK) Point Of Sale Transaction £0.25
    International Point Of Sale Transaction £2.00 per transaction
    Internet Balance Enquiry £0.00
    ATM – UK £1.25
    ATM – Outside UK £2.00
    Online Statement £0.00
    Online payslip (if setup though employer) £0.00
    Cash load via PayPoint £2.00 (for any amount up to max daily load)
    CHAPS Transfer £15.00 per transaction
    SMS Alert £0.12 (for each text)
    Foreign exchange fee plus 2% of transaction value
    Replacement Card £9.95
    Lost or stolen reporting £0.00
    Email customer service £0.00
    Telephone calls to Customer Service £1.00 per minute*
    Calls to Customer Information Line £0.05
    Card Refund Fee £5.45
    PIN Reissue £2.00
    Paper Statement (per 62 days) £1.50
    Shortfall Administration Fee – £10.00
    payable should you make a transaction
    that causes your Prepaid Card to incur a
    shortfall or to increase a pre-existing
    shortfall on your account.
    Cash-out £4.00




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