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Why a bank charges win doesn’t mean the end of ‘f...
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Why a bank charges win doesn’t mean the end of ‘free banking’ blog discussion
This is the discussion to link on the back of Martin's 'Why a bank charges win doesn’t mean the end of ‘free banking’ blog. Please read the blog first, as this discussion follows it.
Well said Martin. Quite frankly, if banks started imposing fees for things like direct debits, and writing cheques, they know very well that they would loose customers left and right. In fact I personally would change banks so quickly, it would make their head spin.
I agreed that we all need to manage our finances better. I for one have never been any good at ensuring I spend under my means.
New plan this year is to be better at spending (or not spending) and so far I have saved £21.38 from January's wages, which is excellent for me.
Bring on February's wages, I'm sure to save more money there, so hopefully I'll be able to buy one of my "luxury" items at the end of the month, as there'll be enough to fund it.
This site is fantastic, lots of plain English common sense and reminders to help everyone through it.
Keep up the good work Martin, I'm looking forward to tomorrow's It Pays To Watch!
Well said Martin. Quite frankly, if banks started imposing fees for things like direct debits, and writing cheques, they know very well that they would loose customers left and right. In fact I personally would change banks so quickly, it would make their head spin.
Don't be bullied by banks!
If all banks worked this method which ever bank you went too would be the same.
The well-managed account holders who the spin says “will lose out” are actually, if anyone were to lose out, the least likely to. That’s because they’re the ones the banks want the most.
I must disagree - the "well-managed" account holders do not pay any interest, fees, etc, and thus do not make any money for the banks - why should the banks want them the most? What the banks want are the ones who use their overdraft regularly, incur fees etc. Obviously, they are not looking for completly irresponsible borrowers who won't pay back, but the "perfect customer" is not "well-managed"
Great read Martin.... this hasn't and will not put me off fighting for my bank charges, and my PPI on two loans and a credit card. I have even got the bank doing an investigation as to how they put me overdrawn by paying a cancelled direct debit so they can't seem to manage my money either.... I hope to have more news on banks disregarding the Direct Debit Legislation..and how to make a fuss about this.
Proud to have my head out of the sand and managing my finances.
I understand what you are saying about the bank's best customers aren't always the one's who keep their accounts out of overdrafts etc, however the banks make millions on investing peoples savings, loans, credit cards and other fees ...and exactly what martin said ...look at the interest rates standard accounts accrue compared to what they accrue for themselves as a business... banks are big businesses, they thrive on good and not so good customers...
Last edited by snook66; 23-01-2008 at 7:48 AM..
Reason: added something into text
I must disagree - the "well-managed" account holders do not pay any interest, fees, etc, and thus do not make any money for the banks - why should the banks want them the most? What the banks want are the ones who use their overdraft regularly, incur fees etc. Obviously, they are not looking for completly irresponsible borrowers who won't pay back, but the "perfect customer" is not "well-managed"
Because the information that passes through their current accounts offers a load of data mining possibilities for the Banks to sell them further products (savings accounts, mortgages, insurance, loans etc) and the Bank will know the likelihood of default is low because they have seen the way the account is operated.
I believe those who will lose most are those who just keep their accouts in credit, work hard, balance their books, do not use unauthorised overdrafts but don't have much disposable income for the Banks to be able to cross-sell further products or services.
Remember when First Direct floated their ideas a while ago - charge £10 per month unless either
1. You had additional FD products OR
2. You paid in at least £1500 per month to the account
Customers who haven't got the spare cash to do the former or earn enough to do the latter are the ones who will lose most.
If Banks started to charge for Direct Debits, as this is the prefered method of payment for all utility bills and bills in general i would have to pass this cost over to the company concerned!
If companies can pass on higher running costs to consumers etc etc then the same will appy to them when my costs go up as a result of their prefered payment methods. The same goes for paying bills i.e credit cards, to banks using the DD method.
I will simply submit at the end of each financial year a bill for all the DD charges that will have been incurred by myself for payment of their bill. If they don't pay it then legal proceedings will follow as they no doubt would to recover any debt oweing to them.
If Banks started to charge for Direct Debits, as this is the prefered method of payment for all utility bills and bills in general i would have to pass this cost over to the company concerned!
If companies can pass on higher running costs to consumers etc etc then the same will appy to them when my costs go up as a result of their prefered payment methods. The same goes for paying bills i.e credit cards, to banks using the DD method.
I will simply submit at the end of each financial year a bill for all the DD charges that will have been incurred by myself for payment of their bill. If they don't pay it then legal proceedings will follow as they no doubt would to recover any debt oweing to them.
Would this actually work if EVERYONE joined in??
No it wouldn't. You have a choice of how to make payment to the company. They would just stop giving discounts for people paying by DD.
I consider I have free banking. I have never paid to make a payment, I have never paid for an overdraft or overdrawn account. I always keep my money in top saving current accounts, and any extra in high interest savings accounts. My banking is paid for by people that are less careful.
If the banks lose and are only allowed to charge minimal fees for overdrawn accounts, then why don't the banks charge say £500 per year for a bank account. If you remain in credit for the full year and pay in your salary (or £1500 per month), then they could give you a bonus of £500 back at the end of the year. If you do not pay in your salary or go overdrawn just once, then you lose your bonus. That would not be paying over the odds to go overdrawn, since it would formally cost nothing to go overdrawn.
Last edited by BlackBladder; 23-01-2008 at 9:49 AM..
I wish I was as confident about this issue as Martin. Whether it is 'free banking' or 'fee free banking' it's still free banking for those in credit. It's just terminology/semantics.
I believe that it will be the end of this free arrangement and the argument used will be that the rest of Europe charges for current account fees. I expect the banking industry will act in the same way as the utility companies. When one starts charging, the rest will follow. There will still be competition in the market because the charges and services will vary from bank to bank.
I really believe that this will happen and possibly by the end of the decade. Lets wait and see who has egg on their face shall we?
When the time comes, I shall definitely be pointing the finger at all those irresponsible people who cannot control their spending and accept the blame for their own stupidity.
ONe thing that should definately be investigated by someone and maybe should be another campaign for Marting is whne banks offer to write "Free" wills or reduced rate wills for clients.
I recently saw a lady who a major high street bank wrote her and her husbands will free of charge a few years ago. He unfortunately died last year and the estate was worth £750k the said high street bank had insisted on being executors in the will and for basically performing the executors service and trasnfering the assets over to the wife with four small gifts to the children they charged £37.5k, this is criminal.
The will they wrote, was OK but did not consider any inheritance tax planning or other assets protection but the fact that they charged £37.5k for what must have been at most 15 hours work for a solicitor is outragous.
Many, many people will face the same type of thing.
Just one way big banks make money.
That is appallling - if a solicitor charges too much you can complain and get the fees charged properly assessed and if thought unreasonable they are reduced. And they are backed by the Solictors indemnity fund
I would suggest the lady complains to the Banking Ombusdman or takes legal advice as to any redress - take advantage of the inital free consultation with a solicitor to find out.
And get your will drawn up properly - a tax planning will may cost about a grand but it could save your beneficiaries a lot more than that in inheritance tax. Free wills are only ever going to be the really simple bog standard wills and if their affairs are really that simple can be handled by most lay executors with a bit of nouse, a phone and a willingness to seek advice.
And while I'm on my soapbox. Solicitors do go into liquidation, or stop trading for all the usual reasons so unless you intend to keep very close track of them while they have safe custody of your will it is a better idea to lodge your will with the Probate Registry. Then you don't have to try and find the will -they already have it. (link to relevant page below)This is the voice of experience speaking.
I wonder how many people are aware of Fractional Reserve Banking. This is the debt based system which ALL the banks legally operate within and which is a complete scam.
The banks do not lend you money, they give you CREDIT. Banks are allowed to lend around 9 times more "money" than they have on deposit. So if you put a hundred pounds into a bank account (ie a deposit), the bank can "loan out" around 900 pounds, 800 pounds of which doesnt even exist!. Yes folks believe it or not, you are paying interest on money which does not even exist other than on paper. That is why banks are constantly wanting you to open accounts and transfer your debt to them. To a bank, even your debt is classed as a deposit. Google"Fractional Reserve Banking" and find out how you are paying interest on something that doesnt exist. The reason Northern Rock is in such a state is that the illusion of banks having sufficient money to pay back customers when they want it is shattered when everyone wants it at once!
Hey Martin, how about blowing this scam?
Very good article but i would like to share the fact that I have found an alternative.
Quote below from your article
There’s rate competition, but no charges competition. Another oft-quoted myth about bank charges is “if you don’t like them why don’t you switch bank.” Yet there really is virtually no competition in the bank charges sector and never has been, so where do you go?
I have gone to "Think Banking" they have guaranteed me no penalty charges ever on their managed account. For my wife and I to have a maestro card is 17.50 a month. Apparently 10 a month for one maestro.
After abbey stinging me for loads more charges after christmas I have delighted in cancelling all my debits and look forward to finally closing my account. I thinnk this could be a way forward for many forum users..
Could you give me an example of this "choice" of how to pay the company?
Sky Digital, Mobile phone contracts, Internet Service Providers and others only accept Direct Debits. On the few occassions when I have not had sufficient funds in my account(not due to overdraft!!) and have had to phone and pay by debit card I have had an admin charge added at a later date.
Believe me, if I could pay everything with cash, Postal Orders, or Bank Giro slips I would.
Quote:
Originally Posted by BlackBladder
No it wouldn't. You have a choice of how to make payment to the company. They would just stop giving discounts for people paying by DD.
I consider I have free banking. I have never paid to make a payment, I have never paid for an overdraft or overdrawn account. I always keep my money in top saving current accounts, and any extra in high interest savings accounts. My banking is paid for by people that are less careful.
If the banks lose and are only allowed to charge minimal fees for overdrawn accounts, then why don't the banks charge say £500 per year for a bank account. If you remain in credit for the full year and pay in your salary (or £1500 per month), then they could give you a bonus of £500 back at the end of the year. If you do not pay in your salary or go overdrawn just once, then you lose your bonus. That would not be paying over the odds to go overdrawn, since it would formally cost nothing to go overdrawn.
I have worked for a major UK bank for more years than I care to admit and while I agree charges are often excessive I think people often miss an important point that banks often make a loss on current a/cs.
I saw figures a few years back that showed that for the company I work for it costs £100 in the first year of the a/c opening and then £70 in subsequent years to run a current a/c. Why? because i) it costs money and time to recruit new a/cs ii) it costs money to produce cards/chq books/statements, you have to staff call centres (there is a ratio of 1 call centre person per x thousand a/cs) and pay for back office and branch staff, computer systems etc.
The average balance in current a/cs is actually suprisingly quite low so little money is made that way. The main way money is made is through selling loans, credit cards etc and also through bank charges.
It would be my guess that if charges are reduced banks will follow First Direct's lead and introduce charges for not funding an a/c by a cretain amount each month but who knows we could return to the situation that existed up until the mid 1980s (not so long ago) when most bank's made a small charge per transaction.
My banking is paid for by people that are less careful..
Or less lucky. A friend of mine always managed his limited finances impeccably. For no particular reason (?) his bank took out a DD twice, putting him overdrawn. Charged. Charge meant his budget was shot to pieces, from then on a spiral costing thousands of pounds, all from charges, and all stemming from one 'bank error'.
Quote:
Originally Posted by BlackBladder
If the banks lose and are only allowed to charge minimal fees for overdrawn accounts, then why don't the banks charge say £500 per year for a bank account. If you remain in credit for the full year and pay in your salary (or £1500 per month), then they could give you a bonus of £500 back at the end of the year. If you do not pay in your salary or go overdrawn just once, then you lose your bonus. That would not be paying over the odds to go overdrawn, since it would formally cost nothing to go overdrawn.
Assuming you earn over £1500 per month?
If banks can't make their money from everything else, then they shouldn't be in business, but since charges bring in a few billion to the industry a year, and the biggies make £9bn a year or so each anyway. (RBS £9bn, HBOS £5.7bn, really I think they'll survive.
for more info check out www.consumeractiongroup.co.uk . You'll find me there.
New Year's Resolution: Post less unnecessary posts. (and that was 2007)
yes, I realise I may appear cold and heartless a lot of the time.
Could you give me an example of this "choice" of how to pay the company?
Sky Digital, Mobile phone contracts, Internet Service Providers and others only accept Direct Debits. On the few occassions when I have not had sufficient funds in my account(not due to overdraft!!) and have had to phone and pay by debit card I have had an admin charge added at a later date.
Believe me, if I could pay everything with cash, Postal Orders, or Bank Giro slips I would.
I was thinking of utility companies - gas, electric, water, etc. Nearly all these type of companies will give a discount for using DD. If there was a fee, then they would stop giving the discount.
If there was an extra fee associated with a DD, it will be you that pays it, not the company. If you don't want to pay with DD for things like mobile phone contracts, then use an alternative - eg. use pay as you go with a cash top up.
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If banks can't make their money from everything else, then they shouldn't be in business, but since charges bring in a few billion to the industry a year, and the biggies make £9bn a year or so each anyway. (RBS £9bn, HBOS £5.7bn, really I think they'll survive.
Banks will always make money, same as any business.
Banks want some people more than others, so they will price things according to things like how much income the investor will pay in. If someone regularly has their salary paid in, and invests this money in their savings account, then the bank will want this person. They can make money out of the person, so want to tempt them with free (or fee free) banking. Other people on lower salaries or who do not pay in their salary and do not invest in the bank are less attractive. Why should they get free (or fee free) banking, when they are not making money out of them in other ways?
This then leads to the question of should a bank have to give an account to someone, especially if they cannot make money out of them? Is everyone entitled to a bank account? Is everyone entitled to the SAME bank account? Should someone saving large amounts with a particular bank get free banking while another that does not save with them have to pay on a per cheque / per deposit / per payment basis?
If everyone should have access to a bank account, but the banks cannot make money from them, then why should other people subsidise their costs?
Pls be nice to all MoneySavers. There's no such thing as a stupid question, and even if you disagree courtesy helps. Take care over copyright. Use excerpts and links rather than copying long text. This site asserts copyright on all comments posted on the board.
Pls be nice to all MoneySavers. There's no such thing as a stupid question, and even if you disagree courtesy helps.
Why a bank charges win doesn’t mean the end of ‘free banking’ blog discussion
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