The future of banking on the back of reclaiming Discussion Area

Former_MSE_Archna · 6 June 2006 at 12:29PM

This thread is specifically to discuss

The impact of reclaiming bank charges on bankings future.

Please first read the special section of the reclaim bank charges article

IMPORTANT: To discuss the practical process of reclaiming bank charges Go here

Rafter · 6 June 2006 at 1:41PM

As acknowledged on the 'Tonight with Trevor McDonald' programme the future shape of UK banking will change as a result of these reclaims.

If the banks eventually stand up in court and defend themselves the courts will decide what the true costs are and probably remove over £1 billion pounds of income from the UK banking system.

Horray we may say, and in the context of over £30 billion of banking profits last year why should it make any difference?

Well - most of the profit is made overseas and most from business banking rather than current accounts and products for the general public. Banks are not charities and while they have been very profitable they will want to try and recover their losses rather than just saying 'that's life!'

We already have a very competitive and efficient banking system compared to the rest of the world, with no annual account charges and favourable interest rates (0.1% current accounts excepted!).

So how could banks recover their lost £1 billion in fee income?

Introduces charges for cheque payments or current accounts?
Reduce interest rates on savings?
Increase interest rates on loans?
Close branches?
Introduce more overseas call centres?
Reduce the juicy offers available to switchers?

None of which look particularly attractive to me but.........

why should my free banking be subsidised by someone who is less savvy and gets charged £80 for going overdrawn by £10? That is far worse.

Personally I would like to be incentivised to operate my account efficiently for my bank. So free cash withdrawls at their branches, charges for using cheques when I could use online banking or a debit card. Why not charge me for cheques or using another banks machine - if it costs my bank money to do so?

Going to be interesting times ahead and great that consumers have the internet and champions like Martin Lewis to really make a difference on issues like this.

R.

gt94sss2 · 7 June 2006 at 3:20AM

Rafter wrote:

So how could banks recover their lost £1 billion in fee income?

Introduces charges for cheque payments or current accounts?
Reduce interest rates on savings?
Increase interest rates on loans?
Close branches?
Introduce more overseas call centres?
Reduce the juicy offers available to switchers?

I'm not saying this would happen but some ways I could think of:

a) Scrap Basic Bank Accounts (i.e. I assume they are loss making)
b) Introduce charges for current accounts and credit cards
c) Introduce charges for cash withdrawals and issuing cheques (or even for giving you a cheque book)
d) Smaller overdrafts and credit limits with a monthly "service" fee if you want any overdraft facility at all.
e) make credit cards more like chargecards and insist that all balances are paid off within 1 or 3 months of the transaction date - no more carrying balances on cards for years
f) charge per direct debit, BACS or debit card transaction
g) scrap 0% credit card offers (or low % for life deals) and cashback cards
h) stop paying interest on current accounts. Lower interest on savings accounts and a higher interest rate on loans.
i) make it a lot harder for customers to open new accounts (wanting letters of recommendation etc - as they used to want to do)

Now I am not saying that all or any of these are going to happen but those are just the ones that come to mind - almost without thinking... and I believe all of them (apart from "a" perhaps) currently exist in some other Western countries or used to exist here.

Regards
Sunil

student100 · 7 June 2006 at 1:51PM

It's interesting to note how relatively "well-off" we are in the UK when it comes to banking. We expect not only "free" current accounts, but incentives, free overdrafts, high credit interest rates, 0% periods and so on.

I wonder how it happened in the first place - compare with e.g. the USA (arguably a more "consumer-driven" culture) where there are routinely fees for day-to-day use of current accounts (or a minimum balance at all times of e.g. $1000), fees for writing and paying in cheques, fees for ATM withdrawals (even at your own bank), annual fees for credit cards and so on.

I would like to think that consumer pressure (and the few remaining mutual societies like the Nationwide) would help to stop the UK banking system going completely in that direction... but I don't know if it will. (We very nearly lost free LINK ATMs a few years ago). I think everyone's got to keep their eye on the ball to avoid these things being introduced by stealth.

And in any case - it won't be the "always in credit, always read the small print" customers who have to pay... but those who don't shop around, don't read the small print, don't always pay their balance in full, and so on - the sort of people who haven't yet fallen into a spiral of debt, but still pay a fair bit more than they need to for their banking.

jonesMUFCforever · 7 June 2006 at 6:50PM

I have a vested interest as I work in a bank.
Some of the points posted by above posters are very valid but if the government get really tough with the banks then I see the following scenarios
1 Banks will get rid of 'basic' bank accounts as they produce no income and cost to run.
2 They will introduce fees for things like current accounts, extra statements, cheque books etc etc as they do in France.
3 A lot of people who have bank accounts now due to the existance of basic acounts will be disenfranchised - how will they get paid their benefits, pensions etc etc?
4 My last point is this - why should I who follow the terms and conditions of an account have to pay for some of the above because some people won't follow the t&c? If they get away with it now it will be anarchy and IMO it is only right that where a bank has refunded in full charges for last 6 years they have the right to give that customer 30 days notice to find another bank!
If they can't because of poor financial records then tough!

michaels · 7 June 2006 at 10:15PM

Sign a contract, don't read the small print, get charged - ok we don't all read the small print so the first months charges might be unfair (note wor unfair no discussion of the legal situation).

Having been charged once it is impossible to claim lack of knowledge so either change to a different provider or meet the terms and conditions signed.

Claiming back thousands of charges = taking the pee

The charges relate to spending money that is not yours - why do people have a problem with this concept?

foreveryoung_3 · 8 June 2006 at 12:40AM

Hi I am very savvy with money, I am in a position where I have to be paid by the Benefits agency into a Bank Account, I have owned my own home and business and am a super saver bargin hunter, I have struggled this week to put enough food on the table for my children, why, because money was not paid into m y account over 4 weeks ago, yes I am getting the payments back soon at some point, but not today, not when I need them. I live in a village and sometimes when I am on Incomming calls only I cant just ring the bank or get the DSS to answer the phone on a monday or tuesday because they are so busy with all the mistakes they have made. I am on a limited income, if I do not use Direct Debits I get charges 10% more on my bills, The local post office's have closed so I have to rely on the banking system to not mess up and the Benefit office not to mess up, I have not messed up, and lots of people who are in the same mess as me are really already struggling to make ends meet or they wouldnt of got charged in the first place, I wish I could have 1.000 just sitting in the bank for a rainy day, but with 3 young children and one with exceptionally high attention needs and destructive behaviour at time, there is never any spare money to cover situations when money hasnt gone in when it should. I have been so let down by the system as I feel like a criminal being threatened all the time with some sort of action or another, and frankly its time it stopped, I would be happy without a bank account, I have never made any money having one, in fact its cost me probably 4.000 having one. I will happily go all the way to the court for my money as they have caused me extreme suffering and poverty. I have tried to be a good person and would not dream of ripping people off and am losing faith very fast in all the services this country my father and his father thought fit to fight for RIP.

Sorry I do not want to offend anybody but I feel offended by the reference to our debts as being made by idiots who cant read or manage our money. I am not enviouse of anyone having money, well done I say, its how it should be, and I wish I could strive for the same, but at the moment I am having to care for my son 24/7 so I am at the mercy of the system in place.

Chrissie

ManAtHome · 8 June 2006 at 1:04AM

Well, the people who've been charged for overdrafts etc will end up paying even if they get a bit back from the current campaign. Most financial institutions tend to work on the inertia principle - if you occasionally get a spurious charge it's probably not enough to make you leave. However, if profits start to drop a bit it'll go the same way as the 0% credit cards - may be 0% but we'll tag on a 2% transfer charge.... Be prepared for "the good old days" when free banking was the exception.

anntics · 8 June 2006 at 10:40AM

I can remember "the good old days" when we paid a monthly fee for a bank account. At that time I was in a similar position to foreveryoung and knew every trick in the book to gain a little extra time - most of them wouldn't work in the modern systems.

Any system that charges for cheques rather than debit cards/internet transactions for example, will unfairly target those who, for whatever reasons, cannot use those options.

If we must return to charging for banking services, (and we pay for all other services regardless of the profits the company makes), then a monthly account fee, imho, would be preferable to ad hoc charges for individual services. At least I will know exactly what I will have to pay and the competition to keep/attract customers might soon drive the charges back down.

A couple of tips to help with charges - if your account allows a free overdraft facility apply for it, BUT DO NOT USE IT. That way if you accidentally drop into the red you will not pay charges. Although I am now in the fortunate position of being in credit, on the odd occasion that a payment was late in appearing in my account it meant I was not charged. I have been with Alliance and Leicester for about 22 years. On just 2 occasions I have been charged for dipping into the red. On both occasions I rang and pointed out the length of time I had been a loyal customer and the disproportionate amount of the charges levied. On both occasions I had the charges refunded in full, so it is always worth giving the bank a ring and trying to get the charges removed.

Rafter · 8 June 2006 at 10:54AM

foreveryoung,

I feel very sorry that you feel offended by some of the comments on this post.

My belief is that everyone should have a safety net but that it is for society through government to provide it rather than the banks.

Should banks be forced to provide basic bank accounts with small overdrafts of say £100 to make up for shortcomings in the DSS perhaps?

Or should the government be forced to underwrite the basic banking system and cover a £100 overdraft to make up for its own weaknesses in ensuring that benefits are paid when they are due.

But if someone abuses teh safety net and exceeds their overdraft it is it the job of other bank customers to pick up the cost or should these customers have their services suspended and be charged a fair amount for the additional costs that they generate for the bank in dealing with failed direct debits and bounced payments?

It is wrong that you cannot benefit from the best prices for utilities if you cannot pay by direct debit

It is wrong that you get charged £100 in charges for going £10 overdrawn when the total cost to the bank is £2.

But it is also wrong to abuse the banking system and to expect still to receive a full service. It has to work both ways.

R.

equitydealer · 8 June 2006 at 12:39PM

gt94sss2 wrote:

h) stop paying interest on current accounts. Lower interest on savings accounts and a higher interest rate on loans.

Most banks don't pay (negligible) interest rates on current accounts already. Most banks have also recently lowered interest rates on their savings accounts too.

The future of banking on the back of reclaiming Discussion Area

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