First Direct Fees: How to Avoid 'Em or Ditch 'Em Discussion Area

cheghead

seven-day-weekend wrote:

I closed my First Direct account yesterday and took my £46 elsewhere.

Me too. Closed the account and took my last £11.60 down the pub before they start charging for entry...lol.

Seriously thou £1500/mth is a lot of money for some people. They must be 'aving a laugh!

DevilGoesDown2Bristol

Well, for what it's worth, I think this is an experiment with a specific goal in mind. Yes, the banks are in it for the profit, but for all the seemingly nonsensical moves in consumer banking from time to time, they are not run by stupid people and they don't do anything without a good reason. If you have a small amount of money in your bank account and don't go overdrawn, they're not making a decent profit margin from their usual tactic of paying you a fraction of the interest that they make on your money. If you *do* regularly go overdrawn but not by very much, they're still not making much in interest charges. Once upon a time they'd have made this up by slapping you with stupendous penalty charges, but all that is coming to an end.

It must be as obvious to them as it is to everyone else that they are effectively targetting the less well-off by introducing fees to an account that has less than £1500 per month paid in. From their perspective, there are a good few benefits to doing so:

1) The recent maelstrom of publicity surrounding unfair bank charges has hit banks in the pocket. There is a small but significant percentage of account holders who consistently go into an unauthorised overdraft by a small amount who historically would have been hit by a penalty fee. Chances are that many of these fit into the "less than £1500 per month and no savings account" category. Yes, the banks charge interest, but if you're talking about a hundred quid or so here and there, the interest charges are never going to amount to anything like the amount they'd have made from charging disproportionate penalty fees.

They could raise the interest rates on overdrafts to even more ludicrous levels than they already are, but that would be even worse PR. This is one way of levying unfair bank charges in advance: only nobody can complain because this isn't a "penalty", it's a "fee" for a service provided.

2) I can see this getting a positive spin by the banks in the near future, and that supposition rests on a prediction. The prediction is that First Direct (and anyone who follows suit) will change the rules so that the current account fees are waived for anyone who deposits more than "n" pounds (£50 per month seems likely) into a savings account with them. An additional and/or scenario is that the savings account must have a minimum positive balance. What they will claim is that they are thus the good guys by encouraging people to save.

Of course, in practice they are no such thing, and implementing such a measure will make them money in a variety of ways. It will mean that people who like First Direct's service but not their rates - and have thus kept their savings in a decent-rate account but maintained FD as their current account - will have an incentive to move money into FD's distinctly average savings account. They then make money off the difference in interest between what they pay out and what the money makes, same as usual.

3) It also would mean that people who are consistently overdrawn are faced with a conundrum: do they clear £50 from their overdraft or pay into the savings account so as to avoid the £10 fee for that month? If the overdraft is small, it might be that it's cheaper to pay into the savings account; and despite the cold illogic of it, many would feel psychologically better for doing so anyway. The bank then wins twice: the customer pays out ludicrous interest on the £50 they didn't clear from their overdraft *and* the bank makes money from the poor savings account. If the customer chooses not to pay into the savings account and tries to clear the overdraft instead, the bank will still win because they'll take £10 out as a "fee", not a "penalty charge".

Ultimately, I see First Direct's actions as a first step toward a "two-tier" consumer banking offering from all major providers.

The paid-for account thing has never really taken off, mainly because most consumers are bright enough to realise that the amounts charged by the banks are in no way made up for by the paltry additional "benefits" provided by the so-called premium services. This is a way of introducing everyone to the idea via the back door...

What I think will happen if this takes off is that most banks will offer two primary forms of current account. On the one hand, you'll have a fee-paying current account where the fees are waived provided you are doing other things that make the bank money like using their credit cards, paying into their naff savings accounts, or maintaining a significant positive balance in your current account so's they can cream off the interest. They'll justify the existence and terms of this account by offering slightly better rates of interest on positive balances than they have on traditional accounts.

The other type of account will be "free" accounts with very basic services, higher overdraft interest rates and even lower positive-balance interest rates; these will be all you can get if you don't earn enough to qualify for the fee-paying account.

It's a bit of a cynical scenario, but a plausible way of turning the current situation on its head. Nobody will want a "free" bank account when a fee-paying account is so much better in the same way that nobody who can get a better account wants a Basic Bank Account nowadays. The perception will be that the fee-paying accounts are effectively "free" provided you play the game and the banks get to rake yet more money out of those who can least afford it whilst still trying to look socially responsible and customer-focussed.

All in all, my guess is that this is both the first reaction to the clampdown on unfair penalty charges and the opening of the door into a new era of consumer disadvantage in banking!

bankersmug

I have pulled my ISA investments out of First Direct on principle.

bpyoung

Um, why doesn't everyone just open up a savings account with them? Job done and a lot less hassle than moving your account elsewhere. I don't have a problem with them introducing charges - it won't affect me as I tend to have a fairly large balance in my account. If they want to get rid of their less profitable customers, then fine, they're perfectly entitled to do so. They're a business, and their job is to make money. The fact that they may be targeting the less well off is neither here nor there - they're entitled to choose who they want as their customers.

I imagine this will work very well for them as they'll slim down their customer base to people putting a decent amount of money for their account. Although I guess it's partly their own fault that they're in this situation as loads of people will have opened accounts here just take advantage of various promotional offers they've run.

There will be a few people who don't have to pay the fee that will leave "on principle" - I imagine this will be a tiny, albeit very vocal, minority.

sandburner

bpyoung wrote:

Um, why doesn't everyone just open up a savings account with them? Job done and a lot less hassle than moving your account elsewhere. I don't have a problem with them introducing charges - it won't affect me as I tend to have a fairly large balance in my account. If they want to get rid of their less profitable customers, then fine, they're perfectly entitled to do so. They're a business, and their job is to make money. The fact that they may be targeting the less well off is neither here nor there - they're entitled to choose who they want as their customers.

I imagine this will work very well for them as they'll slim down their customer base to people putting a decent amount of money for their account. Although I guess it's partly their own fault that they're in this situation as loads of people will have opened accounts here just take advantage of various promotional offers they've run.

There will be a few people who don't have to pay the fee that will leave "on principle" - I imagine this will be a tiny, albeit very vocal, minority.

entirely agree. We were always under the impressiuon that you had to pay a minimum of £1000 anyway. Anyone who earns above this but below the £1500 will probably have another Fd product that will exempt them from the charge anyway. Stick with them!

Zebedee69

Iv been living in Ireland for 6 years and Spain for a while. The rates they have over there are simlilar to other European Countries.

Basic accounts have no cheque book and only an ATM card (not debit)

No Overdrafts (At All....!!!) If you havent got the money to pay for something then it bounces.

10 Euro Charge For having not enough money for a DD to go through.
5 Charge if you lose your ATM Card
Credit Cards are not realy something people have in Ireland.
Loans are typically about 11%

Irish people tend to use Credit Unions for loans etc.
If you watch Irish TV (Or Spainish etc etc) there are no IVA Adverts, No Loan adverts, No Credit Card adverts, nothing!!!

Tarting doesnt exist. Most people have one credit card and to be honest the banks would consider themselves bad lenders by allowing people more than one.

Average Credit Card Limit.... About a few grand....

What I feel is that the UK has a totally different attitude to debt than other European Countries. In Ireland if you had 10,000 debt (Not including Mortgage) you are badly in debt. Compare that to the thousands people owe that + more just on Credit cards here and you can understand the problems the UK has.

For those of you who think this is because Ireland is Backward then ask yourself why nearly every other Country in the World has the same attitude. That includes all EU countries and America.

My feeling is that by moaning about bank charges customers are forcing the banks to adopt a policy far more like the current ones in operation in other countries where well be charged for things and also that Credit wont be nearly as widely available as it once was.

So who's shooting themselves in the Foot? Banks will always make money. But you can say goodbye to getting that handy HP loan for the sofa...... I love the current UK system as iv learned the art of good budgeting from being a Irish/Spanish Citizen for years. If your sensible you can borrow for next to nothing money, you can manage finances easily and have a bit of freedom.

Problem is, in other countries managing money and debt is something your taught to do. Iv never met so many people clueless about APR's and Credit since I came back, its frightening because we live in a country that has mountains of debt and very few people who understands how it works.

I dont know where its all going...................

bpyoung

I just opened a FD savings account. It took about 10 seconds. People, just do this, and quit whining.

southernscouser

I understand those that aren't in a position to close the accounts should open another one to avoid the fees but those that can should leave on principal in my opinion.

Like Martin has said they aren't even competitive anyway.

Why shouldn't we whine?

Like you said they are a business. If you went into a restaurant and order steak but got fish what would you do? Complain or order steak again? If they don't offer a good service or product we are happy with don't buy it. Take your money elsewhere. If we just put up with what we were given we would be fed crap all day long. Start standing up for your rights. Start making these banks work for your money just like a builder or a plumber would.

Cheddington2001

I have been with FD, because of its outstanding customer service, since 1989

Yesterday, when I spoke to FD about the charges, I mentioned that this would be a problem for people on pensions and other relatively low incomes.

I added that I understood that they had never targeted these people as customers anyway. The FD employee said that she would not have pointed this out to me, but that I was correct.

In the end, it seems the only way to make money from a bank is to own it - to hold shares in it. Perhaps that is what we should all be doing if we can afford it.

bankersmug

bpyoung wrote:

I just opened a FD savings account. It took about 10 seconds. People, just do this, and quit whining.

The point is you shouldn't have to.

If people stand back and allow this to happen this could well be just the thin end of the wedge.

First Direct I'm not bothered about - let them drive away customers.
But if other banks do this, we will all lose out.

Let's show the other banks what happens if you stop playing fair.

Think it won't work? Remember the Barclays climbdown on cash machine charges? - consumer power put paid to that one and if we all vote with our wallets with First Direct, we can nip this one in the bud too!!