Martin on Radio 5 this morning and the banks

carolt

julieq wrote: »

You're just parading your prejudices Harry. That is a pat list worthy of the Daily Mail. I guess "these people" all have plasma TVs too.

It's not impossible to make a mistake even if you're careful. I'm careful, and I accidentally hit a bank charge for which a DEBIT CARD transaction (not a direct debit) which took me 86p overdrawn on an account I'd requested no overdraft for. This resulted in a £25 charge for the "service" of considering whether I could be allowed to go 86p overdrawn, and a further £25 for the transaction itself. I'd have preferred the transaction rejected because I NEVER ASKED FOR THIS SERVICE when I applied for the account, in fact I rejected the offer of credit.

OK, I can get irritated, shout at customer services, close the account, and check more carefully next time, because I don't generally run my account close to zero and this is an unusual event. But if you're short of cash, you're by definition running close to the line, and you have statistically a far higher chance of making a mistake.

And when you make a mistake, you're finished. £50 is a lot of money to someone who hasn't got much money, and it shifts the centre of gravity down for next time. These people you so happily pigeonhole as f eckless chavs are real people with familes to feed and frankly I'd rather they did that than boost the coffers of the banks and provide you and me with free banking.

The cost of both the money and the risk of the unauthorised overdraft not being repaid can come out of an increased rate of interest. These fees are simply usurious.

Well said, that girl.

IveSeenTheLight

chucknorris wrote: »

You might call it lazy but I call it efficient to pay by direct debit, why spend a lot of time writing out cheques and paying for postage or calling 08 telephone numbers every month. I might be wrong but isn't there also some financial benefit in paying some bills by dd.

The problem with DD is that the amount can dramatically change.
I recall when my local council tax office decided to change from paying over 12 months to paying over 10. the result was that they effectively took two months payments at one time. It was fortunate that I had the funds in the bank at the time, but this could easily have been overseen and resulted in unwarranted debt.

An alternative option to DD is standing order. That way the payments cannot change until you authorise them.

IveSeenTheLight

WestonDave wrote: »

I wonder how many of those advocating banks working on cost only basis, would be happy if someone pitched up and wanted to borrow their car and insisted its morally wrong to charge more than the petrol costs. If people take the banks money in the form of a loan it should be down to the bank to decide how much it charges. Banks are commercial organisations designed to make a profit - they are not social services hardship fund!

[playing devil's advocate]
If the banks are paying you 0.1% interest on your current account for the funds you have in the bank, should a similar percentage not be applied for an amount you owe the bank if overdrawn
[/playing devil's advocate]

lemonjelly

IveSeenTheLight wrote: »

[playing devil's advocate]
If the banks are paying you 0.1% interest on your current account for the funds you have in the bank, should a similar percentage not be applied for an amount you owe the bank if overdrawn
[/playing devil's advocate]

Very fair question.
I think one issue around this case as well, is that the charges are penalties, whereas in reality, they are only supposed to cover the actual costs incurred.

Take the example of compensation. Where someone has been adversely affected by anothers negligence, & there is a duty to pay compensation, it is calculated on the basis of putting the compensation recipient back in the position they would have been prior to the event. It is not supposed to make them better off - you shouldn't profit from it.

With the bank charges, were the charges applied a fair reflection on the costs incurred by the banks as a result of the person going overdrawn?

Out,_Vile_Jelly

misskool wrote: »

Direct debit is the preferred method payment of choice. You get discounts and stuff from it. At the moment, we pay electricity, gas, council tax (all ESSENTIAL) via direct debit. And because we pay by direct debit, we get it cheaper. Why are the poor being asked to pay more for essential services? Electricity is much more expensive on a key.

Perhaps people should be taught about personal finance first because giving them the bitter pill.

I know BT reduce certain charges if you pay by DD, but as far as I'm aware all the essential utilities you name can be paid by cheque, in cash at Post Offices (or in person at the Council offices) or by card over the phone. I pay my rent by standing order and all bills by cheque and don't use DD for anything- I've said this before, but I think it makes people lazy and passive about their money and much more at the mercy of bank errors.

julieq

What the charges should cover are (a) the cost of the money on a commercial basis, and (b) the increased risk of default. Both of these are fractions of the cost of the fees and essentially could be covered by a larger interest rate in the "unauthorised" region.

What the charges should NOT cover is the cost of your and my banking. As soon as the banks argue that these fees are necessary to provide general free banking, they are EXPLICITLY stating that they are way beyond the actual cost of the default and being used for other things. That's really why they switched to the idea that they were charging a fee for a service, they no longer even attempt to claim it has any relation to the costs to them.

In fact the "free banking" argument is a wonderfully successful negative PR campaign by the banks, essentially scapegoating an entire section of the less well off and creating an almost hysterical mindset where anyone hitting a bank charge and complaining is in effect recklessly stealing from someone who doesn't. You can see how well it worked by looking at some of the posts on this thread. The fact that it doesn't stand scrutiny is secondary.

Free banking didn't start at a time of generalised fees for overdrafts, it started because of competition in the sector, which still remains and if anything has increased. It would be very hard on a competitive basis for a bank to start charging fees now, many are trying with "premium" or "private" snob accounts offering an enhanced package of benefits, but not very successfully.

It's naive to think that the banks are just staying current account fee free because they think they can get enough money from overdraft fees and want to be nice. If they could they'd charge for current accounts AND impose overdraft fees: they want to maximise income, like any company does. Competition stops them.

lemonjelly

Out,_Vile_Jelly wrote: »

I know BT reduce certain charges if you pay by DD, but as far as I'm aware all the essential utilities you name can be paid by cheque, in cash at Post Offices (or in person at the Council offices) or by card over the phone. I pay my rent by standing order and all bills by cheque and don't use DD for anything- I've said this before, but I think it makes people lazy and passive about their money and much more at the mercy of bank errors.

I agree with what you say, but feel the main concern really is very well outlined by ISTL - the lack of control (other than to cancel) & the amount of control held by the creditor to be able to change the direct debit.

I have worked in a council tax department & seen staff change peoples DD's. The people affected weren't told by the council I was working for.:eek: Therfore couldn't prepare.

Wasn't there a big issue not long ago where the utilities companies all massively increased peoples DD's?

If you have an expectation that £X will leave your account on a set day every month, you can budget for that accordingly. Problems will arise if the DD reciever suddenly changes the amount, you've budgeted according to the original planned & agreed amount, but the find that the company took 4 times £X.

Which will leave you short of cash the following month, which will leave your budget stretched....(spiral?)

misskool

Out,_Vile_Jelly wrote: »

I know BT reduce certain charges if you pay by DD, but as far as I'm aware all the essential utilities you name can be paid by cheque, in cash at Post Offices (or in person at the Council offices) or by card over the phone. I pay my rent by standing order and all bills by cheque and don't use DD for anything- I've said this before, but I think it makes people lazy and passive about their money and much more at the mercy of bank errors.

You can pay all bills by methods other than DD but almost all methods cost more and you get discounts for paying your bills by DD. It's not just BT, edf and southern electric have DD discounts and you pay a cheaper rate. That's just the top of my head as I pay all my bills by DD.

tomterm8

misskool wrote: »

You can pay all bills by methods other than DD but almost all methods cost more and you get discounts for paying your bills by DD. It's not just BT, edf and southern electric have DD discounts and you pay a cheaper rate. That's just the top of my head as I pay all my bills by DD.

As I understand it, though, DD is substantially cheaper than other payment methods, and so there is a kind of logic to it. Of course, banks won't specify the actual costs, so they might be lying. Like they did over late payment charges (where, for years they claimed that the charges were just to cover the cost of the transaction, when it turned out their markups were in the region of 1000%).

kabayiri

julieq wrote: »

It's not impossible to make a mistake even if you're careful. I'm careful, and I accidentally hit a bank charge for which a DEBIT CARD transaction (not a direct debit) which took me 86p overdrawn on an account I'd requested no overdraft for. This resulted in a £25 charge for the "service" of considering whether I could be allowed to go 86p overdrawn, and a further £25 for the transaction itself. I'd have preferred the transaction rejected because I NEVER ASKED FOR THIS SERVICE when I applied for the account, in fact I rejected the offer of credit.

I think we could learn something from Florida toll road charges (of all places!)

Some years back, I panicked when we had no change and went through an auto-toll gate without paying.

The holiday rep explained that they had a system whereby you were allowed 3 such mistakes a year, because they recognised that people could genuinely get caught short.

However, after that, you were sent a fine.

Why can't the banks do the same? Accidentally going over your account limit for a few days over the year is not the same as persistent abuse of your overdraft limit.