Managed bank accounts
MANAGED bank accounts promise to be financial life coaches: bringing some good sense and order to those with chaotic cash flows.
Can they deliver?
In this guide we take a long look at these accounts:
How they work
In return for a monthly fee, managed bank account providers offer a highly ordered version of a high street current account.
Two accounts in one
The accounts often make use of "jam jars", splitting the money in them into "outgoings" and "available cash".
All the money paid into an account goes into the "outgoings" pot to be allocated to important commitments like rent, bills, and loan repayments; anything left over is then made available to the account holder.
This aspect makes such accounts appealing to people who have had trouble budgeting in the past.
The amount shown as available at the ATM is the account holder's disposable income: essentially any outgoings are already accounted for even when the money technically hasn't left the account yet.
"Managed bank accounts are proving to be a popular choice for the people we help," Debt Support Trust told us.
Most accounts offer a standard debit or prepaid card, so managed account holders have access to their money through standard ATMs and paying at the till.
Some providers also have relationships with some high street banks, so they can also offer counter services.
Managed bank accounts don't offer overdrafts. The providers offering these accounts are not banks or lenders, so they can't and won't offer this service.
They also don't issue chequebooks, though account holders can often pay cheques in.
However, managed accounts do offer internet banking, free text messages about account status, and customer service over the phone.
Of those three benefits, managed bank accounts often sell the third - phone support - as "Money Managers" or "Account Managers".
The budgeting support aspect of these accounts is a plus, although there are downsides to handing over this kind of control, as we look at below.
Managed accounts: who's offering what?
Let's take a closer look at some of the UK's biggest managed account providers.
As you can see, they all charge a fairly high monthly fee.
Also note that only Thinkmoney offer a prepaid card which doesn't charge a fee for ATM withdrawals.
|Monthly fee||ATM fees|
|Thinkmoney Personal Account
(£21.25 for joint accounts)
|Secure Trust Bank Current Account
(£12.50 set up)
|The Card One Banking Account
(£17.50 for joint accounts)
Note that these providers often also charge fees for additional cards, balance enquiries, using the Faster Payment scheme, and other services. Anyone thinking of getting one of these accounts should check and double check for the fees most likely to apply to them.
As we mentioned above, managed bank accounts sell themselves mostly on the convenience of someone minding your money.
That's a problem, however, when they mind it badly.
Judging by online reviews, forums posts and comments from our users, bad service from some managed account providers is not unheard of.
Among the complaints are that money transferred to the account fails to appear in it, that customer service is hard to reach, or of bad quality when available.
Managed vs basic accounts
The main competition for managed accounts is the basic bank account: offering many of the same services - without the account managers - for no fees.
At the time of this update, some basic accounts do charge fees for bounced or failed payments - but by the end of 2015, they must be completely free for the account holder.
It's worrying that people who might be better off with basic bank accounts are turning to managed deals.
"Our main concern is that the people using these accounts are often in the poorest bracket in society, so paying for a bank account can result in less food on the table or saving on heating bills," Debt Support Trust told us.
However, the basic account market hasn't helped itself.
Barclays are now that only bank that will accept undischarged bankrupts - those who have been declared bankrupt within the past 12 months - for their basic account. So an undischarged bankrupt who has debts with Barclays will find that a fee charging account is pretty much their only option.
In addition, some banks have previously imposed restrictions on account holders, such as limiting ATM use.
Having said that, basic accounts do offer their services free of charge, and, crucially, getting a basic account could help those with a poor credit history climb back into mainstream banking more easily.
And they are getting better again, even if that's partly because of outside pressure.
Under the changes coming in 2015, basic account holders with nine of the biggest banks should be able to use any machine that's part of the Link network. There's more on those changes here.
But as we said above, managed accounts do suit some people. And whichever people choose, either basic or managed, it certainly beats using a friend or relative's bank account, as Debt Support Trust say some of their clients are forced to, not least because it makes them liable.
It's best to know all the options.
For more information, including a breakdown of basic account services offered by all the high street banks, see our full guide to basic bank accounts here.
Are they safe?
Whenever we're talking about money matters that fall outside the mainstream, it's worth asking what kind of protection is available.
Although the money held in managed accounts isn't in banks, it's still protected under the Financial Services Compensation Scheme (FSCS).
There's more information on that in our full guide.
But FSCS protection doesn't apply to money on prepaid cards - worth bearing in mind for the managed accounts that use them. Find out more about prepaid cards here.
And there's also no fraud protection for prepaid cards - so should the card be lost or stolen, or used fraudulently in some other way, any money lost will not be reimbursed.
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