Fiona Gray: How I was frozen out of my Icesave account

THIS time last week I was feeling quietly smug about the credit crunch. While the rest of the world worried about mortgages and burst into tears when they visited a petrol station, for the first time I was quite happy about not having the ready cash to afford either a property or a car. As far as I was concerned, I was crunch-proof.

But last Monday the smile was unceremoniously wiped off my face when Landsbanki, an Icelandic bank, started to go under, dragging with it thousands of accounts from its online bank Icesave. With no car or house, instead I had been squirrelling away my money.

I chose Icesave two years ago because it had a fantastic interest rate. My money accrued interest, and Icesave sent me regular e-mails about the security of my savings.

I should have seen it coming – those constant e-mails, then the bank's silence when Iceland's financial difficulties started to emerge. But the alarm bells failed to sound, even when I logged on to the website last week to find a letter from the bank manager.

Despite media warnings, Icesave told me everything was fine. Don't worry about what you hear, it said, our bank does not trade in mortgages so we are bucking the financial trend. Our foreign investors are keeping us afloat. And if that does not convince you, we have Iceland's plentiful natural resources to fall back on.

That's OK then, I thought. The next morning I woke up to find my account frozen and Icesave heading for liquidation.

The papers were full of announcements of Iceland's effective bankruptcy, rumours that it would not pay foreign investors, and financial analysts delighting in telling us they knew this would happen.

But plenty of others made the same mistake, with much more money. Hundreds of councils, fire brigades and charities have millions stuck in Icelandic banks.

I should get full compensation, but authorities may struggle to claw back a slither of their money. And when I do get the money, where will I invest it? If the banks carry on the way they are, there will only be one safe place left: under the mattress.