Egg; the internet bank with the amusing/irritating adverts involving guinea pigs.
They make a lot of noise (much like guinea pigs do!) about how good their credit cards and accounts are.
But is Egg all its cracked up to be? (if you pardon the "yoke"!)
While you may get 0% interest on balance transfers until 1 September 2008 and 0% on purchases until 1 December 2007 on their shiny credit card, would you be prepared to keep your life savings with them?
We ask this question, as it has been revealed that Egg could freeze the money in your savings account for up to 60 days if they thought their financial stability was threatened!
In a move that seems pretty timely considering the recent Northern Rock shenanigans, Egg last year changed its terms and conditions to allow it to stop all online withdrawals in the event of there being a run on the bank!
E-savings accounts have always been popular with banks due to their low overheads and many of you as customers like their convenience and generous interest rates.
However, due to the Northern Rock episode, many of you have been wondering (quite rightly) if you could get access to your money if the same thing happened to your bank?
The dodgy thing with internet banks is that apparently, banks have no liability if their websites goes down and many have terms and conditions that allow them to shut down their website to stop mass withdrawals!
Egg is one of them as you can see by this extract from their terms and conditions:
"In order for us to run our business lawfully and with prudent liquidity levels, in exceptional circumstances, we may need to suspend your right to take money out of an account for a period of up to 60 days. We will try to give you notice as soon as possible if this happens although we may not be able to tell you beforehand. You will still earn interest on your account balance and otherwise your rights are unaffected. If you want to take money out of or close your account when it is suspended, we will act on your instructions at the end of the suspension period."
And bearing in mind the huge panic and mass withdrawals by Northern Rock customers, it comes as no surprise to read Egg's reason for wanting to freeze your money for up to 60 days:
"We can restrict at any time the amount which can be withdrawn from your account. We will only do this if: circumstances exist which lead us reasonably to believe our financial stability is under threat (such as where rumours cause actual or potential abnormal levels of cash withdrawals)"
Naturally, we imagine this clause from Egg is a little worrying especially with the financial compensation scheme* not being considered adequate enough by many of you!
(*The Financial Services Compensation Scheme (FSCS) only guarantees to repay you the first £2,000 in your account and then 90% of the next £33,000 if your bank goes under. This means that if you have £35,000 saved, you would lose £3,300 if the worst happened -and any balance above the £35,000 limit!!)
It has been said that Egg are reviewing this clause and that they may remove it altogether.
But until such time, it seems that not only may it be unwise to have all your savings eggs in one basket (geddit?!) but that if you need to get your money out, Egg is definitely not all its cracked up to be!
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