MSE News: Call to end free bank accounts

BobQ

The man should mind his own business. As a public servant he should accept that we live in a free market in which banks offer the services that people freely choose between.

If he could guarantee that a bank that charged a fee also offered good interest fine but if such a regulation were introduced I doubt they would pay the interest.

MoneySaverLog

It's just another way of whacking the savers, first it's printing money making it worth less and less by high inflation / low savings rates. 0.5% base rate is just crippling savers and their attempt to encourage people to spend on credit cause it's cheap. Now he wants to charge us for saving with the banks too with such low rates of interest paid to savers he must be having a laugh.

bert&ernie

MoneySaverLog wrote: »

It's just another way of whacking the savers, first it's printing money making it worth less and less by high inflation / low savings rates. 0.5% base rate is just crippling savers and their attempt to encourage people to spend on credit cause it's cheap. Now he wants to charge us for saving with the banks too with such low rates of interest paid to savers he must be having a laugh.

There can be no savers without debtors. If the debtors can't pay, then the savers can't profit.

One question I do have is: do you think you deserve both a return and a guarantee that your money is safe - aren't they somewhat exclusive?

pqrdef

Insurance is the villain of the piece. It's difficult to sell, so a large part of what you pay is actually to cover the cost of "acquiring" your business. It doesn't go into funding claims, it goes into marketing channels to pay commissions etc.

So there's a big pot of money up for grabs for anybody who can leverage their assets to sell a lot of insurance. The banks have their eyes on this money, and they have the right sort of assets - a customer base, access to their credit files, and a keen in-branch sales force. Sometimes too keen.

Bundling insurance is a specially good racket. Buy a premium bank account for the phone insurance and you may also buy a travel insurance policy that doesn't meet your needs, so you'll never use it. This is brilliant business for the travel insurer. They know how much lower the risk is on policies that are sold bundled, and they pay more for that kind of business accordingly.

So we've got insurance being sold to people who don't want it, don't need it, and may not realise they've got it? Where have we heard that before.

Premium current accounts are undoubtedly being mis-sold, but as things stand, it's very hard to prove individual cases.

The regulators want to stop this sort of business altogether. But the banks always bleat that free current accounts are a loss leader, and if they aren't allowed to sell people stuff, they'll stop competing for current accounts and may have to start charging. Then the regulators back off.

Bailey wants to meet this head-on. If banks have to make their banking operations self-supporting, they can then be banned from abusing their customer bases to sell overpriced and unwanted flim-flam.

MoneySaverLog

pqrdef wrote: »

Bailey wants to meet this head-on. If banks have to make their banking operations self-supporting, they can then be banned from abusing their customer bases to sell overpriced and unwanted flim-flam.

You're not forced to buy these AVA's choice is what's needed. If I choose to have a free account I should not be forced into paying more for it if I don't want these added value flim-flams.

opinions4u

pqrdef wrote: »

Insurance is the villain of the piece. It's difficult to sell

On the whole, people don't walk into a bank and say "I'd like to buy some insurance" so it is necessary to sell it proactively. But chatting to a customer, identifying needs and selling the most suitable product you have for that customer is not difficult.

Most have contents in their home. All of them might be I'll at some point. All of them are going to die at some point.

so a large part of what you pay is actually to cover the cost of "acquiring" your business. It doesn't go into funding claims, it goes into marketing channels to pay commissions etc.

This was always my issue with lump sum PPI. The commission rates of the monthly premium 1990s PPI were around 12% to 25%. No interest was charged on the premiums and the remaining 75% to 88% of the premium was split in unknown quantity between claim payouts and insurers.

The lump sum PPI led to bigger premiums and interest on premiums. It was also followed by the introduction of in-house insurers, excessive reinsurance where somebody is taking a cut at each stage and because so many people were making lots of money the pressure to sell ramped up.

In effect, while there was nothing wrong with what the policy did, it was oversold to anybody who you could get to say "yes".

So there's a big pot of money up for grabs for anybody who can leverage their assets to sell a lot of insurance. The banks have their eyes on this money, and they have the right sort of assets - a customer base, access to their credit files, and a keen in-branch sales force. Sometimes too keen.

Precisely.

Bundling insurance is a specially good racket. Buy a premium bank account for the phone insurance and you may also buy a travel insurance policy that doesn't meet your needs, so you'll never use it. This is brilliant business for the travel insurer. They know how much lower the risk is on policies that are sold bundled, and they pay more for that kind of business accordingly.

This is an area where the customer needs to show sense to. Bundled insurance is convenient. It may or ay not be good value. Equally, one or two threads on here suggest some bank staff conveniently forget to mention they have a boring vanilla "free" account.

The regulators want to stop this sort of business altogether. But the banks always bleat that free current accounts are a loss leader, and if they aren't allowed to sell people stuff, they'll stop competing for current accounts and may have to start charging. Then the regulators back off.

Bailey wants to meet this head-on. If banks have to make their banking operations self-supporting, they can then be banned from abusing their customer bases to sell overpriced and unwanted flim-flam.

If Bailey succeeds, which he won't, the banks will have a new source of revenue. It is stupid in the extreme to think they'll want to stop selling other stuff at the same time.

andy_allblack

louiser123 wrote: »

i was made to have a bank account so i could be paid my wages, i was also told i have to have a bank account to enable me to gain a mortgage. therefore as this was not my choice and i was made to open one i would like my wages paid to me in cash please like i was years ago, after all that option was taken away from me i had no say in it! i have no overdraft i have my pay put in monthy and some bills paid out dd and i pay on my card or withdraw when required. i dont get charged for anything but they use my money to place on the money market so i guess they are making enough. if my bank decides to charge i will move one that does not.

Louiser 123 I totally agree what you've said here, there are some cracking opinons regarding the possible end of free banking, making total sense to me, I just wish this so called business man would take time to read them.

nilrem_2

dalek wrote: »

Typical money grabbing banks!

Much as I dislike Bankers with their huge bonuses as typified by Fred Goodwin, it's only fair to point out that banks are not charity organisations they are businesses and no different to Tesco or Currys whose sole aim is to make profits and as much as possible!

I do not want to see these charges introduced and I curse this bloke for suggesting it but I can understand that banks will do whatever they can get away with to maximise their profits.

If it does happen it will be done gradually with one bank going first to test the water so to speak (knowing the banks they will make an agreement to decide who is to go first) we can all help to stop them in their tracks by moving accounts to give them the message that we are not going to make it easy for them.

Even though there are regulators and such like to prevent them from taking advantage of the customers I am concerned that the banks might liaise on this (cartels exist throughout business as long as they can get away with it) and they will all start charging leaving us with little choice but to pay!

We don't want these charges, but don't blame the banks, they will do what they can get away with to maximise profits same as any business!

grizzly1911

Banks know exactly how much running their accounts cost.

Agree on the"whack a mole anoalogy". Perhaps a decade ago the banks were forced to offer a transparent pricing options on Business Current accounts and some form of basic package. A great deal of analysis was done to ensure that in rejigging the pricing structures across the mix the net loss was minimised.

Whilst there is a high cost in infrastructure the cost of operating accounts today is less in real terms per account than say 30 years ago. We have cash machines rather than cashiers, we have debit cards rather than cheques processing, we have cash back at checkouts, we have internet banking where you do so many transactions your self, we have same day payments that we can do our self.

Branches have closed, regions have consolidated and back office staff reduced through IT systems.

One of the problems they do have is less footfall in branches so they get less chance to cross help face to face.

I don't have much sympathy with many of those who complain about un authorised bank charges or the cost of overdrafts. after all you can control what goes in and out of your account. If you choose not to bother controlling or you choose to take an overdraft that is up to you.

Many people don't even ask whether they can have an overdraft they just take it.They trust you to operate your account responsibility but if you go on a runaway spending spree one of their control mechanisms is to charge penal control fees.

If you choose to buy a premium current account, whether it be good value or not, that is your choice. Same goes for any other product they offer you. No different do buying a Costa Lot.

This debate has rumbled on over the last 30 + years and we still. have the free bank account. I would be surprised if a free , full service bank account is not available going forward. Of course it may not be offered by all banks.

Whilst current account money is volatile many people have a couple of thousand sloshing through each month, with many more having reasonable floats sitting idle, the Banks do benefit from this plus the potential for add on sales.

grizzly1911

JuicyJesus wrote: »

No, in fact the man with the funny little moustache murdered socialists by the thousands after ensuring they had no political influence whatsoever and then co-opting their name for a diametrically opposed political party. What he tried was called fascism and was remarkably different.

This is assuming we're talking about Hitler and not Charlie Chaplin here, although someone who thinks Hitler was a socialist is probably not able to tell the difference.

He had a funny one too.