Switching Accounts and Overdraft

samwardill

CLAPTON wrote: »

what areas of banking do you think should be subject to 'perfect competition'

e.g which of the following should all banks be forced to provide exactly the same and which should they be allowed to differentiate themselves?

-OD limits
-foreign transaction fee
-banking hours
-number of bank branches
-location of bank branches
-staffing of banks branching
-size of loans
-loan APRs
-colour of debit cards
-staffing of call centres

etc

I am saying that banks should be encouraged to offer continuity of overdraft limits to remove this as a barrier to switching (just like insurance companies have to give you continuity of NCD). Same principle applies for NCD on car insurance. New company does not know you so might over high price but industry norm is to honour NCD to encourage competition. If this were not the industry norm the regulator would step in!

CLAPTON

samwardill wrote: »

I am saying that banks should be encouraged to offer continuity of overdraft limits to remove this as a barrier to switching (just like insurance companies have to give you continuity of NCD). Same principle applies for NCD on car insurance. New company does not know you so might over high price but industry norm is to honour NCD to encourage competition. If this were not the industry norm the regulator would step in!

OD limit seems to be very important to you
personally a local branch is very important to me
other people doubtless will have other priorities which may discourage them from switching


so why do you select OD as a barrier to switch but not the other things in my list?

in any event, the probable outcome of any attempt to honour OD limits on switching, would mean that they would be capped at 250.

samwardill

CLAPTON wrote: »

so why do you select OD as a barrier to switch but not the other things in my list?

Because the very act of switching is likely to result in a lower overdraft limit at the new bank because the new bank does not know you.

Look at the car insurance comparison. There is a common (de facto regulated) standard for No Claims Discount (because it is required to ensure competition) but insurers are free to compete as they wish in most other aspects of product features.

CLAPTON

samwardill wrote: »

Because the very act of switching is likely to result in a lower overdraft limit at the new bank because the new bank does not know you.

Look at the car insurance comparison. There is a common (de facto regulated) standard for No Claims Discount (because it is required to ensure competition) but insurers are free to compete as they wish in most other aspects of product features.

As I've said OD is only one of many comparable matters. To a great many people it is totally irrelevant whilst other things may be very relevant.

In car insurance, the NCD is central to virtually all people and would therefore form a massive barrier to switch for all car users.


Truely, would you prefer, if for the sake of easy switching all OD were capped at 250?

innovate

Why not keep Nationwide for the overdraft, and open N&P for the card? Faster payments and Standing Orders can be used to transfer money as required.

There's plenty of people on here with a lot more than 2 current accounts, for the simple reason that different banks have different offers, and cater for different requirements.

We'd be in terrible shape if they all offered the same.

Chrisblue1962

innovate wrote: »

Why not keep Nationwide for the overdraft, and open N&P for the card? Faster payments and Standing Orders can be used to transfer money as required.

There's plenty of people on here with a lot more than 2 current accounts, for the simple reason that different banks have different offers, and cater for different requirements.

We'd be in terrible shape if they all offered the same.

Wise words from Innovate (ty)...

Personally, I would set up the N & P account but move one bill at a time every month over to the new account by changing DD details to the new account.

Eventually, all your bills will be on the new account and you can run down and close the Nationwide accounts.

By keeping the Nationwide accounts open once to OD has been paid off you are leaving yourself open to temptation... :think:

BugsyBrowne

I've deleted them now as couldn't see those posts going down to well.

Still don't like banks though or their dippy staff.

seriousDFW

samwardill wrote: »

I think that it is understandable that a company doesn't want to expose themselves to such a large amount immediately to a customer they don't really know. However I think that this is a barrier to switching and regulators or consumer groups should work with banks to try to eliminate this as a barrier (as they have done very successfully by getting banks to make transfer of direct debits relatively pain free).

To Clapton's point, the capitalistic competitive system may not be perfect competition but, the lack of perfect competition has a negative impact on consumers & it is sometimes appropriate to seek to mitigate this.

Perhaps part of the reason that N&P initially offers low overdrafts to new customers is to mitigate cost of low foreign exchange fees but my gut feeling is that this is not the whole story.

Transferring DD's easily doesn't alter the company's exposure, as you're expected to have funds to cover them. Agreeing to honour another bank's OD by regulation would be absurd. You couldn't force a bank to give an overdraft larger than they want to give - this could put them into real difficulties. I agree about making switching as easy as possible, but any sort of regulation of honouring another bank's overdrafts is utterly ludicrous. The only way it would work is if, as has been said, it was capped at a low figure like £250 which would defeat the purpose.

samwardill

seriousDFW wrote: »

Agreeing to honour another bank's OD by regulation would be absurd. You couldn't force a bank to give an overdraft larger than they want to give - this could put them into real difficulties.

Is it absurd that your insurer agrees no honour a no claims discount validated by another insurer? Nobody is forcing the bank to offer an account to you. I'm just suggesting that, if a bank does offer you an account we need to establish a norm that the overdraft they offer should be comparable to the one you have (not back to zero).

seriousDFW

samwardill wrote: »

Is it absurd that your insurer agrees no honour a no claims discount validated by another insurer? Nobody is forcing the bank to offer an account to you. I'm just suggesting that, if a bank does offer you an account we need to establish a norm that the overdraft they offer should be comparable to the one you have (not back to zero).

Come on, an insurer knows that no genuinely like-for-like policy can be offered by another insurer for that low a price, whereas you are living proof that one bank could give a customer a huge overdraft of £8k that another bank would not even consider giving to a new customer. You can't compare insurance policies which are mostly worth tens or hundreds of pounds with an overdraft that could be massive. I've heard of overdrafts running into the tens of thousands - how could a bank be regulated into offering those to those coming from another bank. At best there would be a situation where banks would not entertain taking on a customer from another bank purely because they would have to give a large overdraft. In this way you'd actually reduce competition because banks would be less willing to take on these customers requiring large overdrafts just because their previous bank did.