Spot the Mutual

Slim

From the front page of today's Sunday Times Money Section -

Nationwide's incoming boss, Graham Beale, also said he would consider introducing current-account fees. He said: "If the industry changes its approach we would follow"
However, Barclays boss John Varley said last week he remained committed to free banking.

Proud to be Different

newfoundglory

If you think about it, this makes perfect sense.

At the end of the day, banks DO make more profit than building societies.

When claiming back charges, its the building societies who would be least be able to affort this "cut-back" of charges which previously subsidised so-called "free" banking.

Fee-charging accounts do make sense. They are fairer. Those with more money will pay less (or nothing) in bank charges or fees, those will less money or who frequently "accidently" go overdrawn will pay more (but less than currently) in charges and also pay a fee to have their account.

Why you ask? Because it makes no sense to allow those who break the T&Cs to subsidise those who stick to them, which is what happens currently (and has now resulted in many people claiming these charges back). If someone cant manage their account and goes over their limit they pay £30. I stick to my limit so this person subsidises my "free" banking. But why should those who stick to the T&Cs now subsidise those who can't? Why should i now subsidise the person who cant stick to their limit?

Free banking wont end for those who behave and manage their account well. However, i am referring to full-service accounts here. It costs money to provide a counter-service, a cheque book etc. Basic bank accounts will still exists and stay free i should think.

But free banking, as we know it, is most definitely on its way out!

ManAtHome

And yet another angle - why should people with savings accounts and/or mortgages subsidise free current accounts by paying or getting more or less interest, as NFG said, a "service" account should be charged.

Slim

Thanks for the reply Newfoundglory and yes there is an argument for a fairer, fee based current account system.

What sticks in my claw is the constant harping on about the benefits of mutuality and Nationwide's "proud to be different".

If what I hear is correct your first two paragraphs are, however, only half right. Banks make more profits but, unlike mutuals, as they have to pay shareholders dividends they have a smaller net amount to "afford this cut-back".

Rafter

Mutuality means no incentive to rip customers off because the customers area also the members and ultimately 'own' the organisation.

With Nationwide it is so huge though that the members can exert little influence.

They have to rely on the directors acting in their best interests.

Graham Beale is doing so in my view.

It is totally wrong that Nationwide should charge customers who make a late payment on their credit card or who breach their overdraft limit more than the actual costs of putting the situation right again.

If the Banks (and building societies have been applying inflated and unlawful charges, and the office of fair trading, press and consumers seem to think they have been, then it is totally right that they should stop.

If that leaves Nationwide making a loss on it's credit card and current account business then it would be unfair for customers with mortgages or savings accounts to subsidise this business, Nationwide has to change its pricing.

It could either cut interest rates on positive balances, increase overdraft and credit card rates or introduce charges for some of the services that cost it a lot of money.

It really depends on your view on the following........

If you were a current account customer of Nationwides using internet banking, debit card and using it as your main account with direct debits etc and maintaining an average balance of £1000 earning 4% are you happy that Nationwide cuts your interest rate to 3% so that:

Another customer who only uses their account once a year on holiday for the free foreign exchange money gets free banking?

Or another customer who keeps an average balance of £500 and goes into the branch once a week to do over the counter transactions and who prefers cheques so still insists on using them in supermarkets, despite the additional cost to Nationwide continues to get free banking?

In my view, basic card based banking should be free in return for receiving no interest on positive balances.

If you want a full functioning current account with cheque book and interest on your current account you may well have to promise to use it as your main account, pay 50p for using a cheque where you could have used a debit card or online transaction and may have to pay 99p a month for a paper statement rather than an online one.

That is very different from these 'premium' accounts where you supposedly get £100's of pounds of benefits for £10+ per month (including 75% profit for the bank) but which any savvy moneysaver can tell you you could get for a lot less by shopping around.

R.

Slim

I've no doubt that Nationwide will always take an ethical stand and be in the vanguard for maintaining customers' and members' rights. Its recent dropping of its policy of offering the same mortgage deals to all of its customers is proof of this.

Proud to be different.