Bank Charges Opt Out procedure - how should it work?

mr_jetlag

Premier wrote: »

BoE lending rate = 0.5% p.a.
Rate received from my bank for my deposits in my current account = 2.47% p.a.

I wrote a cheque out today (within my available cleared balance).
How much will I be charged for processing that cheque?
How much will it cost the bank to process that cheque transaction?

Who do you think is paying for the difference, because I can't for the life of me understand how I am?

London interbank offer rate (rate at which banks lend out YOUR money): 0.7% or thereabouts. More relevant than BOE base rate but usually quite close.

Interest rates for at least 80% of current account balances: 0.1% or 0% (If you believe some people, it may even be closer to 95% of balances). Bank makes 0.6% annualised profit on OUR deposits (maybe not YOUR deposits, but certainly the vast majority of savers' money)

So the "who" is obvious: all savers who didn't lock in a high rate, or have too much cash to move around quickly (taking advantage of the £5 Halifax Reward Saver loophole for example) or too little time to bother or need instant access to their cash.

Premier_2

The rate is not locked ... it's a variable rate

The account is a current account giving you the instant access you would expect from any current account.

Afaik, it is still open to anyone (subject to status) and simply requires a monthly credit of £1000. Not a great deal when you realise that is little more than full time NMW levels.

The account? The Lloyds classic plus current account.


Even if we use your figures, 0.6% on a £1000 credit balance is just £6 per year.
Take a look at transaction charges on business accounts and you'll soon see that you don't get many transactions for a measely £6 - it'll barely cover 2 transactions per month
So who's paying for the rest who are receiving free banking?

Alpine_Star

The value of credit balances

C.26 The largest source of PCA revenue is interest on credit balances which was £4.1 billion in 2006 or 50 per cent of total PCA revenue. In 2006 the average daily credit balance over the year of the 16 banks surveyed was £97bn A. The seven largest banks accounted for 89 per cent of the total and the leading four banks 68 per cent.

C.27 The seven largest banks paid £409 million in credit interest to their customers in 2006. For every £100 of credit held with these banks over a year, on average a bank generated £4.27 in revenue whilst paying their customer 47p. However there is significant difference between the four established banks, which paid 23p on average, and the challengers, which paid £1.26 according to our calculations.

C.28 Whilst the £4.27 is not the same as interest forgone by the customer, as a consumer would not necessarily be able to receive the same level of return as the bank, it gives an indication of the value of a customer's credit balance to the bank.

.......Average balance per account over the year: Credit balance £1740

http://www.oft.gov.uk/shared_oft/reports/financial_products/oft1005c.pdf

davidgmmafan

I know this is not strictly on topic but why not remove the practice of banks applying the charges to the account. If there is a better example of having someone over a barrel I do not know it.

Any other 'service' is invoiced, and thus paid, seperately. Banks should be no different.

moneysavingkitten

davidgmmafan wrote: »

I know this is not strictly on topic but why not remove the practice of banks applying the charges to the account. If there is a better example of having someone over a barrel I do not know it.

Any other 'service' is invoiced, and thus paid, seperately. Banks should be no different.

I agree strongly with that, but I do not know what the bigger implications would be. It would also appear to be fairer. An invoice usually has a breakdown of what exactly you are paying for on it which would be nice as well.

whitewing

I think opt out is vital.

I also think that banks should not force us to move to get opt out. I have a private maintenance arrangement for my son whose father works abroad. If I move banks I would have to run two current accts (have no address/contact details for dad - son sees him v occasionally at Granny's - and no means of ensuring he would continue to pay if I closed the account. As he pays by standing order the bank would not contact him with the new details).

Alpine_Star

davidgmmafan wrote: »

I know this is not strictly on topic but why not remove the practice of banks applying the charges to the account. If there is a better example of having someone over a barrel I do not know it.

Any other 'service' is invoiced, and thus paid, seperately. Banks should be no different.

Totally agree.

FYI the brief that the Lending Standards Board is conducting this work on is from paragraphs 3.18 to 3.25 here http://www.oft.gov.uk/shared_oft/personal-current-accounts/oft1216.pdf

typos1

Opt out? Thats ridiculous, it still allows people to get clobbered if they forget to opt out.

Its still allowing banks to set up traps for their customers to fall into.

And why would anyone NOT opt out if they knew they could?

Charges like this are un-ethical, unfair and immoral, anything other than an outright ban is NOT acceptable

ILW

typos1 wrote: »

Opt out? Thats ridiculous, it still allows people to get clobbered if they forget to opt out.

Its still allowing banks to set up traps for their customers to fall into.

And why would anyone NOT opt out if they knew they could?

Charges like this are un-ethical, unfair and immoral, anything other than an outright ban is NOT acceptable

Do we really need to base legislation on the most dimwitted in our society. I suppose now we should be putting in rubber pavements for people who forget to tie their shoelaces. The more responsibilty you take from people, the less capable they become of looking after themselves. Hopefully things may change a little now with the new government.

dzug1

PlasticMan wrote: »

I don't pretend to know the technical details but I'm pretty sure those kind of communications don't happen by post.
.

If it's a bounced cheque it certainly is.