Digital banks on the rise: What to do if you can't access your bank account

As cash machines and branches continue to close across the country, digital banking is becoming increasingly important. However, as the headlines over the last couple of weeks have shown, depending on digital banking alone can leave customers vulnerable to not being able to access to their accounts. 

Last week, BBC Watchdog reported that some Monzo customers had their accounts frozen due to investigations into suspicious account activity. While most accounts were frozen for a few hours, some customers were unable to access their money for a number of days. It should be noted that this is not unique to Monzo, as all banks are under legal obligation to freeze accounts if they have been flagged by the National Crime Agency (NCA) for suspicious activity. Banks also often freeze accounts as a way to protect customers from potential fraud or cyber crime that could be taking place. Normally, banks will aim to get the matter resolved as quickly as possible and, if the activity is discovered to not be suspicious, will reactivate the account immediately.

This week it was reported that MPs have condemned the level of banking IT failures that have resulted in online banking crashes and customer disruptions. In the condemnation, TSB was highlighted for its IT failure last year, which resulted in customers being unable to access their accounts and up to 1.9 million customers being impacted.

If an account is frozen due to suspicious activity the bank is not allowed to reveal why the account is being investigated or allow customers access to money in the account. Customers should also be aware that, as freezing an account is a legal obligation, it is not a banking error and, as such, customers will be unlikely to gain compensation. This means that if a loan or credit card is taken out as a way of securing emergency money while the account is frozen, the debt is the customer’s responsibility and they will have to pay back any interest incurred on the loan or credit card. While the bank cannot provide much information about the frozen account, customers can keep in regular contact with the bank with the aim of getting the account reactivated as quickly as possible.

In the meantime, customers will need to find an alternative source of income to cover their costs while the account remains frozen. One way to do this could be to have savings in an easy access savings account with a separate banking provider, which can be withdrawn and used as an emergency fund if needed. Alternatively, having a credit card can also offer a means for paying for everyday basics, although borrowers should ensure that they pay off the full amount to avoid paying interest. In addition to this, consumers should also avoid withdrawing money using their credit card, as there are usually high charges for doing this.

Not being able to access your account due to an IT error, while still frustrating, is usually not as problematic as having an account frozen, mainly because customers should be able to access their money either via a cash machine or in branch. If a bill or standing order needs paying, customers should contact the bank for advice, while those wanting to check their balance or do other forms of simple online banking should also be able to do this in branch or over the phone. In addition to this, as IT failure is a banking error, customers can claim for compensation, especially if the error has had a financial impact, for example, being charged for a payment that was missed as a result of the IT failure.