A brave new world of banking

benf_2

Update Note: Now read Martin's full
"How to beat the new charges" article

With the announcement from First Direct that it is to start charging a £10 monthly fee for everyday banking, unless you meet certain conditions, today has ushered in a return to fees not seen for a decade.

BBC News on first Direct

Have MoneySavers started to bite? And more importantly perhaps, is their current success self defeating in the medium term?

The argument goes something like this:

Banks have, for the last decade at least, exploited those unable to manage their finances to their own advantage with large incidental fees (of questionable legality) and high default interest charges, while leaving gaping loopholes as detailed on this site for savvy customers to profit from credit cards, signup bonuses etc.

Sites like this provide a stunning education, turning net payers (profitable for banks) into net profiters (costly for banks). They will hurt the banks profits.

Banks are businesses. They will always respond to a threat (and MSE is a big and growing threat) by shifting to new market niches.


Monthly fees are entirely legal, and indiscriminate. If sites like this make such fees, and rebalancing of credit/debit interest rates (so banks earn more on lending than they spend aquiring capital) the only way for banks to legally make a profit, the moneysavers are the ones who will suffer.

FirstDirect may be a small player, and its fees are not applicable to most customers, but its a dangerous first step. Customer loyalty to the older banks is sufficient that many will be prepared to risk introducing incremental, creeping fees.

Perhaps a moral argument is needed here. The question is; banks exist to make a profit, and only to do so. Retail banking bust be profitable. So who should pay? Should it, as currently, be those who fail to manage their savings, the unlucky, the disorganised, the inumerate, the mentally ill - generally the poorest sections of our society, or should it be shared equally by all? Is there any other way of funding banking? What do you all think?

If we want to maintain the ststus quo, however damaging that may be, there may be actions we could take.

The only way i can see is a big revolt. If all moneysavers closed their first direct accounts, perhaps that would send a strong enough message to the banking world that fees for everyday banking are not acceptable.

So should Martin ask all MoneySavers to close their FirstDirect accounts in the next tip?

Dagobert

benf wrote:

FirstDirect ... its fees are not applicable to most customers

The Banking Fees will affect 200,000 of 1.3 million FirstDirect customers - that's 15%.

dchurch24

So should Martin ask all MoneySavers to close their FirstDirect accounts in the next tip?

In my opinion, yes.

It's the only language banks respond to. Fighting back.

C_Ronaldo

just close your account, you shouldnt have to pay the fee

going2die_rich

Would any bank other bank dare to introduce fees if say 1 in 4 First Direct customers voted with their feet? I totally doubt it. Shareholders would be far too nervous with such a reaction and start ditching First Direct shares and also vote against such a policy being introduced in other banks.

I am sure every bank is watching First Directs customers. If they don't walk, expect most of the other banks follow with it's monthly charges for having an account with them.

Obviously if First Directs customers all leave then no other bank will risk such action therefore not introduce any other charges.

And YES Martin should tell everyone to ditch the account. Hundreds of thousands read the newsletter so potentially First Direct could lose up to 50% of it customers if they followed his advice, warning all the other banks to stay away from monthly charges.

Tootsie_Roll

benf wrote:

Should it, as currently, be those who fail to manage their savings, the unlucky, the disorganised, the inumerate, the mentally ill - generally the poorest sections of our society

.

An assumption that underpins your argument and is completely wrong not to mention offensive to those on low budgets. In fact as a generalisation exactly the opposite is true, those on low budgets know exactly where their money is going. Bank charges are incurred by those who can't/haven't managed their finances properly through ignorance or neglect. As I mentione elsewhere - in law ignorance is no excuse.

Now the rest of society is paying for that ignorance and neglect.

Thanks :rolleyes:

dchurch24

Tootsie_Roll wrote:

.
Now the rest of society is paying for that ignorance and neglect.
Thanks :rolleyes:

Well, actually, if it's people who are depositing less than 1500 quid each month, then surely it's the same section (roughly) of society that is paying?

It's the greed of the banks that bought this on - and nothing else.

HSBC made nearly 12 billion quid in profit last year. I would say that they can afford to act and conduct business in a fair and reasonable way without resorting to underhand, unfair and illegal tactics to prop themselves up.

If they acted fairly and made *only* 8-9 billion, would that be such a bad thing?

dougk_2

Personally , i don't mind as long as the government acts and taxes banks for the excessive profits they are making. In fact the giovernment should change the law to say any company can only make "saving cuts" in terms of staff and increased charges to customers if they are LOSING money (eg negitive profit figures before paying shareholders etc)- it willk eep our taxes down generally and keep employment high if this is the case.

Tootsie_Roll

dchurch24 wrote:

Well, actually, if it's people who are depositing less than 1500 quid each month, then surely it's the same section (roughly) of society that is paying?

It's the greed of the banks that bought this on - and nothing else.

HSBC made nearly 12 billion quid in profit last year. I would say that they can afford to act and conduct business in a fair and reasonable way without resorting to underhand, unfair and illegal tactics to prop themselves up.

If they acted fairly and made *only* 8-9 billion, would that be such a bad thing?

You always come up with this argument and conveniently forget that bank accounts are lost leaders for banks, only there to attract customers in the first place. Your actions have directly resulted in the withdrawl of one of the best, free banking services in the world - be ashamed.

dchurch24

Your actions have directly resulted in the withdrawl of one of the best, free banking services in the world - be ashamed.

Wow. I can only assume that you have used current accounts in other countries.

I have. My French bank account doesn't charge and I can get on the phone to them without having to press lots of different numbers and without having to wait for hours for the phone to be answered.

One of my best friends lives in the Czech republic - his bank is the same - no charges, no default charges and easy access (they actually stay open past 5pm would you believe).

Another of my friends comes from Hungary. He refuses point blank to use a UK bank, as he can see what a rip off it is. He regulary walks around with about 3-4k in his pockets rather than take his chances with a UK bank.

I even tried to get him to open an account - at least a savings account - and let's face it, I am no advocat of the British banking system.

He refused on the grounds that it's easier and cheaper for him to take his money physically to Hungary and deposit it in his current account there.

Does that not tell you something?

So for you to come here and *blame* me for *ruining* of the best (and I do believe you said *free* as well - yet you will, for the most part, get less interest on your money than the rate of inflation) banking systems in the world is frankly misguided at best, and at worse, blatently insulting and blinkered.

Why not have some facts to back you up once in a while?

Or would you rather naively continue to believe the propaganda spread by the very people who are imposing the charges - i.e. "Britain is the only country in the world where banking is free" etc... It's a crock, but most Sun readers will believe it blindly; because they are told it's so - without bothering to actually check.

I fail to see how making £1.10 profit from each current account is a loss leader. By definition they would have to lose money on current accounts. HSBC publicilly stated earlier this year that they make £1.10 per week from each current account - on average. Not a bad little earner, I would say.

There's 30 million current accounts in this country. I don't know what proportion of those belong to HSBC but I would imagine quite a few.

It is the banks that should be ashamed. When the bank charges have been eradicated, then I shall be proud. You know of the hundreds of cases where people have been put in positions worse than that of a third world country.

If I have been instumental in stopping that, then great.

It seems that the banks are adamant that it is the poorer of society that should fund the better off. Why else would FD be making those on less than £24k pa pay and those over, get away scott free?

11.9 billion quid is more than enough profit. All they have to do is to act within the law and reasonably.

I don't believe that anyone is asking any more than that.

Perhaps you are an HSBC shareholder.

MPH80

dchurch24 wrote:

Why not have some facts to back you up once in a while?

Since you're quick to accuse ...

dchurch24 wrote:

I fail to see how making £1.10 profit from each current account is a loss leader.

Let's be clear - HSBC made it quite clear that the £1.05 is from their PERSONAL BANKING PRODUCTS - not their current accounts.

http://news.bbc.co.uk/1/hi/magazine/4781924.stm

dchurch24 wrote:

There's 30 million current accounts in this country. I don't know what proportion of those belong to HSBC but I would imagine quite a few.

So - lets assume HSBC have 2 million customers. That's £2,100,000 a week in income from personal accounts - that's £102,000,000 a year - that'll be 1% of their income then from 2 million customers. Hardly extortionate. They'd have to have 20 million customers before they'd be in the billions. Put simply - banks don't make the majority of their income from personal banking.

Personal banking is chump change to the banks in terms of profit. Yes it's necessary for the rest of their organisation (in terms of providing money on deposit).

dchurch24 wrote:

11.9 billion quid is more than enough profit. All they have to do is to act within the law and reasonably.

In a capitalist world - a company can never make enough profit. The more profit - the better off the shareholders are and the happier they are.

Get used to it - banks aren't charities - they are businesses - they are out to make as much profit as possible. Just as Tesco want your business by putting out loss leaders to get you to buy their finest ranges - so the banks do the same with their current accounts.

M.