Current Account Charges - Why I have no sympathy

Tim_L

Even at the newer lower levels, the banks must produce information that demonstrates that they are reclaiming costs rather than charging penalties in order to stop people reclaiming them. Which they won't do, because if these turned out to be less than the charges levelled over past years they would have to pay everyone's money back under a glare of publicity.

The banks are currently engaging in a spin exercise on two fronts. Firstly they are reducing charges so they can say they are responding to the regulator (who has been pathetically weak on this issue), and also they are spreading dark rumours that if these charges are repaid, other people will have to pay charges on their current accounts as a divide and rule tactic.

I tell you who I have no sympathy with. It is the selfish holier than thou brigade who seem to believe that they stand in some sort of high moral position on the basis that they manage their money "considerably better than yau" and seem to expect their banking to be subsidised by people in marginal difficulties - what is the problem with YOU paying what your banking costs?

As I say, the fact of the matter is that until the banks demonstrate that they are charging costs and not penalties, the charges will continue to be refunded. Whether you like it or not, the banks have chosen not to defend their position at all, and no amount of complaining here or elsewhere changes that. And of course if the charges were costs and therefore lawful they could not possibly have been used to subsidise other people's banking.

CopperPlate_2

I'd be happy to pay a reasonable fee each month for the services my bank offers - the problem with that, and as other MSE'ers will find - what happens if you've a number of different accounts with different providers? Fees all round? It is designed - probably incidentally - to encourage loyalty to one institution by only paying the one fee (hypothetically anyway at the moment!).

Using the same trite argument as has been used before about paying for services that you use (or is that YOU use?) - what about those on low income or benefits who are also to pay up as well? Or do we enter the age of means testing for bank accounts where the fee you pay is dependent upon your income? It would be interesting to learn whether the people who espouse "fairness to all, pay your own way" have been the sustained "victims" of bank charges/penalties, and in an attempt to "level the field" they are happy for all and sundry to shoulder the cost of them not managing their accounts properly? It's not ivory towers or holier than thou - it's called taking responsibility. Sorry if this is a bit harsh - as I've said before, I think charges should be fair and reasonable for the costs involved to the bank, but they should stay. Banks make more than enough money out of us as it is, whether you are charged fees or penalties or not, but I think of myself as a fairly low maintenance customer in many respects and wouldn't expect to subsidise those who are high maintenance.

CP

Tim_L

You already cost a bank more than someone in debt. By having a positive balance you don't pay interest, and of course they may well be paying you. Overdrafts already subsidise in-credit customers without an unlawful double-dip if an arbitrary limit is exceeded by a penny or two.

But obviously there is some value to the bank in having your cash because it can in itself be used to generate returns, not least by lending it to those in debt.

There is about zero chance of charges for current accounts being accepted: if it were possible then the banks would already have done it. It's not just an idea that has popped out of nowhere because of the charge reclamation.

I really don't understand why people get into such a lather about these charges. It's frankly a question for those who have been charged and the banks to sort out between themselves. If at the end of this savings rates are reduced, then what of it? Banks don't offer good savings rates anyway. It's a complete nonsense to suggest that no bank could afford fee free banking if they didn't make unlawful penalty charges. There are plenty of market leading instant access savings accounts run by companies that don't have attached products with penalty charges, and they can offer extremely high rates of interest and free servicing.

CopperPlate_2

Tim_L wrote:

You already cost a bank more than someone in debt. By having a positive balance you don't pay interest, and of course they may well be paying you. Overdrafts already subsidise in-credit customers without an unlawful double-dip if an arbitrary limit is exceeded by a penny or two.

But obviously there is some value to the bank in having your cash because it can in itself be used to generate returns, not least by lending it to those in debt.

There is about zero chance of charges for current accounts being accepted: if it were possible then the banks would already have done it. It's not just an idea that has popped out of nowhere because of the charge reclamation.

Well, what do you suggest? Since, on one hand you advocate banks charging for services provided but then flatly kill that idea dead by saying it's a non-starter - what is the point you are trying to make exactly? The whole idea (simplified greatly) behind a bank is that it uses money on deposit to lend to others which in turn earns greater interest for the bank than it pays the depositors (be it savings or current accounts). It's all about one set of customers subsidising directly or indirectly the other customers, be they savers or borrowers.

Time_L wrote:

I really don't understand why people get into such a lather about these charges. It's frankly a question for those who have been charged and the banks to sort out between themselves. If at the end of this savings rates are reduced, then what of it? Banks don't offer good savings rates anyway.

I think that recent changes both to credit cards and current accounts tends to show why some people are not too happy with the charges. The fact that the banks have had to reduce the charge to an acceptable level has resulted in them seeking other avenues to ensure the revenue streams are not lost. That means cutting cashback rates from credit cards, increasing interest rates on credit cards, removing LOBT deals altogether, increasing OD rates on current accounts...will I go on. This is just the tip of the iceberg I'm sure.

"Banks don't offer good savings rates anyway" - what's your definition of a good savings rate?

Tim_L wrote:

It's a complete nonsense to suggest that no bank could afford fee free banking if they didn't make unlawful penalty charges. There are plenty of market leading instant access savings accounts run by companies that don't have attached products with penalty charges, and they can offer extremely high rates of interest and free servicing.

So what are you suggesting? Can you compare like for like? I really don't see the point you are trying to make here by comparing a savings account with a current account or even credit card, but you might like to explain it in more detail?

CP

Tim_L

What I am demonstrating is that it is not necessary to charge customers penalties to offer market leading products. Banks do not offer, as a rule, offer market leading savings rates, and the companies that do turn a profit without charging penalties. Banks generally have a pretty poor collection of products which they rely on inertia to sell. There is no requirement to have charges to make good money from financial products.

And do you seriously think that banks have not considered generalised charging for current accounts just because they were making so much from penalty charges that they thought they wouldn't bother? These have been on the table for years, and if they thought they could get away with them we would have them by now: if banks think they can get away with making a charge for something they will just do it. There is no causal relationship between the reclamation of unlawful charges and the idea that charges for current accounts might start. Banks offer the least competitive product they can that will obtain the level of business they want, as any business does.

I have never advocated charges, and I don't believe we will see them. However I am a very strong advocate of the idea that where costs are passed on they should not fall disproportionately on those who are least able to pay them, which is what the self-righteous brigade seem to believe should be the case. They are already paying interest on the money they borrow, so why on earth should they be charged multiple penalties for oscillating around their arbitrary overdraft limit?

But I feel this has nothing to do with the charges themselves. There is a group of people who define themselves by what they see as their ability to manage their finances well. And they are seeing another group of people who they have previously felt vastly superior to (often referred to with utter contempt as "these people" who "live a profligate lifestyle" and "don't take responsibility for their actions") claim back the charges, and thereby apparently emerge scot free from their financial mismanagement. I can see that this could be very irritating.

I am in neither group, but I do not wish to enrich myself by exploiting the less well off. If you actually read what "these people" have gone through individually you may just get a feel for the snowballing difficulties that a bank stealing hundreds or thousands of pounds from someone on a low income can can cause. And if you would prefer this to happen than for you to lose a few pounds a year in lost interest or have to pay a tenner a month for current accounts (which isn't going to happen in my view, but we'll see), then you would do well to re-read the opening chapters of Dicken's Christmas Carol and shudder in self recognition.

CopperPlate_2

No-one likes to think that they are benefitting from another's misfortune. What you say makes perfect sense, however, it appears to be beyond the ability of the current regulators to make any meaningful difference to the way our banking system is being run - remember the Cruickshank Report all those years ago? Speed up cheque clearing and BACS payments, etc? There is neither the will nor the inclination to change the system to suit the consumer and that is also on the part of the government and the banking industry.

I hear what you're saying, but what you are asking for is a complete change of mind set - this is a money saving site: how many times are we encouraged to rip off the industry by opening accounts right, left and centre and obtain a freebie here and there? Is there any thought as to the potential consequences further down the chain?

I think you are trying to take the moral high ground in your own way - you're referring to those who don't agree with you as the "holier than thou brigade" just because there is a difference of opinion. You might not always be correct - have you thought that?

Anyway, I'm not getting into a raging debate about this. Suffice it to say that I am happy to pay my way with regards to anything - be it a bank account or otherwise, so please get off your moral high horse.

Thanks

CP

westernpromise

ironic wrote:

Firstly all charges are detailed in t+cs of accounts so its makes sense a, to be aware what they are and b, to have an account with the cheapest charges.

How do you feel about people who incur charges only because of the pevious charges? Do they deserve to be hit with charges that even the banks agree are indefensible?

nearlyrich

I manage my finances with a spreadsheet and there is no-one more organised that I know, I had a CC which I cleared on 20th June, I got the statement for July and there was a balance of £28 (ish) which should not have been there. They had tried to take a DD of £5 even though the CC was cleared almost a month before ( their mistake) I had cancelled the DD when I tidied uo my bank account a couple of weks before.

On top of the £12 charge for the returned DD they had put interest of over £15 and I spotted it the day it happened as I use internet banking. It took me 3 calls to the company to get it sorted, the first person I called told me I was wrong it was my fault and I would have to pay the charges, their system is infallible (LOL) second one cancelled the £12 but left the interest, third one cleared the interest too.

I was persistant, some people would have accepted it without even calling the CC company others would have settled for paying some of it. If I was not confident with my finances they could have had £28 off me, if I hadn't budgetted to pay the £28 it could have escalated to who knows how much by the next statement.

Not everyone who is in debt is living on the edge and has a house full of plasma tvs, if a relationship breaks down and a non-working parent has to apply for benefits to feed their children they may get into debt by the time they get paid from the DSS.

It's all very well being on a high horse because you are great at running your finances but if you lost your income tomorrow have you got all the bases covered because if you haven't, God forbid ,it could happen to you.

Tim_L

No, I'm not taking a specifically moral position here - at the root of what I'm saying is that the anti-refund brigade should butt out of a situation that is nothing to do with them: it is the business of the banks and the people being charged to sort this out. The "likely effects" are, to be quite frank nothing of the sort, but rather rampant speculation which doesn't really convince when analysed. Fundamentally there's no reason to get stressed or annoyed about what is happening: if the charges are unlawful they will be repaid, and if not then there isn't a problem, is there?

That said, I do have a problem with one group of people making silly generalisations about another, and there is certainly a moral question about whether it is just to steal from the poor to improve your own lot in life. I'm afraid that if you argue with me on the first point I'm duty bound to point this out.

Gorgeous_George

When I started banking, you needed to average £100 credit to avoid bank charges. Perhaps, at today's rates, a balance of £1000 earning 1% or 2% intererst would be reasonable.

There is no excuse for banks charging £25 to bounce a DD of £10 - as happened to one of my girlfriends many years ago (it was TSB). It's a bit like speeding fines - they just want your money and certainly don't want you to avoid paying the fees.

If I owned a bank, I wouldn't want customers who cost me money. I'd want to keep the rich and the financially inept. Joe Average could bank elsewhere.



GG