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Bank of Scotland - charges even for un-used overdraft
br1anstorm
Posts: 215 Forumite
This is a cautionary tale for others who might get caught out the same way as I (almost) was.
I have banked with Bank of Scotland for over 30 years, and in addition to my long-standing current cheque account we had sufficient money in BofS savings accounts for the bank to have offered us "private banking" a few years ago. Flattering, but not something we needed. The current account has never been overdrawn (if need be I simply transfer funds into it from a savings account). Some years back I was notified that the account had a "planned overdraft" facility, or limit, of £2500 - which I regarded as mildly reassuring but never thought I would need or use.
Each year I got a stock letter confirming that the overdraft figure remained the same. I looked at it rather like the notification of the spending limit on a credit card and filed it without a glance. This month I checked my monthly statement and was astonished to see an "overdraft fee" of £62.50. As the account balance had been consistently several thousand pounds in credit for the past several years, I was baffled. So was the Bank of Scotland callcentre, who said there must have been a bank error.
However..... I then called the contact number for private banking, to be told that the Bank of Scotland now charged a fee for agreeing to provide an overdraft facility (whether or not I ever used it and went overdrawn). The annual fee for their agreement to permitting an overdraft of up to £2,500 was £62.50!
I was advised that of course if I ever did actually go into overdraft, I would pay interest at the going rate and probably other penalty-fees - which I would expect. But to have to pay a substantial upfront fee just for the bank's agreement to provide a facility which I had not requested, for which I had no need, and which I never expected to use, struck me as a tad unreasonable.
The bank also pointed out that the most recent notification of the renewal of the facility had said (buried in the small print halfway down page 2) that this £62.50 fee would be charged from December 2011. I had simply not noticed this. Previous years' letters had said there was no fee, and it certainly wasn't flagged up as a change to the Ts & Cs, or a new charge compared to the past.
The bank agreed to refund the fee - and "remove the facility" - so I have suffered no lasting penalty. But it does leave me wondering (a) if other customers like me who always remain in credit have been hit by hefty charges for "facilities" they either are not aware of, or assume will only cost money if they are actually used. And also (b) I wonder if Bank of Scotland is unique. Do other competitor banks all also charge simply for agreeing to permit an overdraft, whether or not it is actually used? I notice that several other major banks have interest-free "buffer zones" on current accounts. These are evidently designed to allow for the occasional small or inadvertent dip into the red because of a delayed payment or similar unexpected glitch. This is in fact what I thought my "facility" was.... I am now rather wiser, but also more wary!
I have banked with Bank of Scotland for over 30 years, and in addition to my long-standing current cheque account we had sufficient money in BofS savings accounts for the bank to have offered us "private banking" a few years ago. Flattering, but not something we needed. The current account has never been overdrawn (if need be I simply transfer funds into it from a savings account). Some years back I was notified that the account had a "planned overdraft" facility, or limit, of £2500 - which I regarded as mildly reassuring but never thought I would need or use.
Each year I got a stock letter confirming that the overdraft figure remained the same. I looked at it rather like the notification of the spending limit on a credit card and filed it without a glance. This month I checked my monthly statement and was astonished to see an "overdraft fee" of £62.50. As the account balance had been consistently several thousand pounds in credit for the past several years, I was baffled. So was the Bank of Scotland callcentre, who said there must have been a bank error.
However..... I then called the contact number for private banking, to be told that the Bank of Scotland now charged a fee for agreeing to provide an overdraft facility (whether or not I ever used it and went overdrawn). The annual fee for their agreement to permitting an overdraft of up to £2,500 was £62.50!
I was advised that of course if I ever did actually go into overdraft, I would pay interest at the going rate and probably other penalty-fees - which I would expect. But to have to pay a substantial upfront fee just for the bank's agreement to provide a facility which I had not requested, for which I had no need, and which I never expected to use, struck me as a tad unreasonable.
The bank also pointed out that the most recent notification of the renewal of the facility had said (buried in the small print halfway down page 2) that this £62.50 fee would be charged from December 2011. I had simply not noticed this. Previous years' letters had said there was no fee, and it certainly wasn't flagged up as a change to the Ts & Cs, or a new charge compared to the past.
The bank agreed to refund the fee - and "remove the facility" - so I have suffered no lasting penalty. But it does leave me wondering (a) if other customers like me who always remain in credit have been hit by hefty charges for "facilities" they either are not aware of, or assume will only cost money if they are actually used. And also (b) I wonder if Bank of Scotland is unique. Do other competitor banks all also charge simply for agreeing to permit an overdraft, whether or not it is actually used? I notice that several other major banks have interest-free "buffer zones" on current accounts. These are evidently designed to allow for the occasional small or inadvertent dip into the red because of a delayed payment or similar unexpected glitch. This is in fact what I thought my "facility" was.... I am now rather wiser, but also more wary!
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Comments
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Just a postscript - I discover in further browsing around MSE that this is clearly all part of the wider initiative by HBOS to re-configure their overdraft charges across the board. Have just been reading this thread
https://forums.moneysavingexpert.com/discussion/comment/26150455#Comment_26150455
Of course there are many ways of skinning a cat, and banks have to figure out how to make retail banking pay as a business. As someone observed in that thread, the perverse consequence of all the political pressure seems to be that with their revised scheme HBOS is making it easier (=less costly) for those who go deeply into overdraft, while hammering those who only dip slightly into the red for a day or two. This might ease the pain of those in deep or cumulative debt, but it's hardly an incentive to sensible budgeting and money management!
My fundamental complaint however remains. It is quite unjustified to make a charge just for "agreeing to permit" an overdraft. A charge should only be levied if/when an overdraft is actually incurred.0 -
A lot of banks make a charge for an overdraft facility. For a lot of people it works out cheaper to have the fee than to go overdrawn and incur fees each time. It's not unusual. If you don't use the overdraft, ask them to remove it and refund the fee.0
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A lot of banks make a charge for an overdraft facility. For a lot of people it works out cheaper to have the fee than to go overdrawn and incur fees each time. It's not unusual. If you don't use the overdraft, ask them to remove it and refund the fee.
As mentioned in my OP, I have indeed had the facility removed and the fee refunded.
It is true that for those who use an overdraft, it might work out cheaper to pay a fixed fee (plus interest) than to pay other overdraft-related charges (plus interest). So it is fair enough to have those options.
But that's not my point. My point is that the bank is charging a fee, not for the use of an overdraft, but for their agreement to the possibility that an overdraft might be used.
The basic principle ought to be: if you use a service, you pay a fee, just as if you buy an item you pay its price. You don't normally pay the shopkeeper for putting something in his window which you haven't bought!0 -
It most definitely is unusual, meer53. I have no less than eight different overdraft facilities with different banks that have persisted for donkeys years including one very large one with your employer First Direct which I have never used. I have never paid a fee for any of them. Nor do I intend to.A lot of banks make a charge for an overdraft facility. For a lot of people it works out cheaper to have the fee than to go overdrawn and incur fees each time. It's not unusual. If you don't use the overdraft, ask them to remove it and refund the fee.
What I think you mean to say is that there are stirrings in the industry which suggest that they might all mean to try it on at some stage in the near future. I wish them luck because the first to try it with me loses the account and the last will signal that a cartel has been at work.0 -
br1anstorm wrote: »Just a postscript - I discover in further browsing around MSE that this is clearly all part of the wider initiative by HBOS to re-configure their overdraft charges across the board. Have just been reading this thread
https://forums.moneysavingexpert.com/discussion/comment/26150455#Comment_26150455
That thread is from two years ago, and is not at all related to the change that you have seen.
Your experience certainly is unusual, and is probably only indicative of the fact that Private Banking accounts from most banks tend to be poorer value than the mainstream accounts.
If you want to retain an overdraft facility on your account, then just change the account to a standard BOS account.0 -
I have always struggled to see the value in "Private Banking".
It seems to me to give you your statements on slightly more expensive notepaper, but little else.0 -
The banks have to make provision in their daily operations for lendings that they might have to make - ie someone taking up an overdraft regardless of whether they DO take it up. OK for one person that sounds trivial/silly, but taken over a few 100000's of customers it will be significant. It will cost the banks to have these facilities in place on a daily basis.
It's a bit like you or me having someone who might at any time demand a 500 cash loan from us with one minute's notice given. We would have to keep that £500 in cash ready available at all times in the house about our person. Instead of which it could be earning interest in a savings account. So it costs us money in lost interest just to have the £500 ready and available even if the £500 is never actually loaned out.
So to reduce the costs to the banks there are a number of strategies they can use.
1. Reduce the amount of overdraft available - seen on MSE regularly
2. Starting charging for merely making the provision available.
Yet another step in the road towards charging an annual fee for the services provided by the bank in running your account for you - much like what happens in most other countries.0 -
br1anstorm wrote: »...we had sufficient money in BofS savings accounts for the bank to have offered us "private banking" a few years ago. Flattering, but not something we needed.
Are you saying you "accepted" the offer (that you didn't need)? If so then your post is a tad misleading (and alarming) to Bank of Scotland "non-private banking" current account customers.0 -
2sides2everystory wrote: »It most definitely is unusual, meer53. I have no less than eight different overdraft facilities with different banks that have persisted for donkeys years including one very large one with your employer First Direct which I have never used. I have never paid a fee for any of them. Nor do I intend to.
What I think you mean to say is that there are stirrings in the industry which suggest that they might all mean to try it on at some stage in the near future. I wish them luck because the first to try it with me loses the account and the last will signal that a cartel has been at work.
Absolutely.
With my account for HSBC they permit one overdraft increase in a six month period without incurring a fee.
If you ask for an overdraft, then an increase, or more than one increase in any six month period, they will charge a £25 arrangement fee.
They however have not charged me for "renewing" my overdraft for another year as it has not increased, even if it had they wouldn't charge - so long as it was the first increase in a six month period.Cashback Earned ¦ Nectar Points £68 ¦ Natoinwide Select £62 ¦ Aqua Reward £100 ¦ Amex Platinum £48
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Are you saying you "accepted" the offer (that you didn't need)? If so then your post is a tad misleading (and alarming) to Bank of Scotland "non-private banking" current account customers.
I'm struggling to see what is misleading or alarming, jalexa. I had a healthy credit balance in my various accounts. This was evidently over the threshold at which BoS provide what they call 'private banking'. This does not involve any change in the actual bank account admin. In practice the main features include being able to talk to a "relationship manager" (aka your old style bank manager!) and being sent info on, for example, specific offers on things like market-linked deposits. Sadly, however, statements still come as computer printouts - no fancy notepaper! What's misleading or alarming about that?0
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