Switching Accounts and Overdraft

samwardill

seriousDFW wrote: »

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.

I don't see why the insurance parallel is not relevant. Although the cost of insurance is less than £8k, the cost of the risk of giving a £8k overdraft to someone who has a proven capability of managing it is much lower than the normal cost of an insurance policy.

I'm not sure why no bank should consider offering a £8k overdraft to a new customer. If I applied for a credit card I'd generally be offered a £5-10k credit limit.

I'm not talking about a regulation that says overdrafts must be offered like for like. I'm just talking about a general principle that they should.

BugsyBrowne

samwardill wrote: »

I don't see why the insurance parallel is not relevant. Although the cost of insurance is less than £8k, the cost of the risk of giving a £8k overdraft to someone who has a proven capability of managing it is much lower than the normal cost of an insurance policy.

I'm not sure why no bank should consider offering a £8k overdraft to a new customer. If I applied for a credit card I'd generally be offered a £5-10k credit limit.

I'm not talking about a regulation that says overdrafts must be offered like for like. I'm just talking about a general principle that they should.

You have built a long history with the bank that gave you an 8k OD and you thinking you can walk into another bank and recieve the same OD you must be nuts.

Its not going happen get over it £250 will be a start with N&P build up your history with this outfit and wait and see what they offer you in terms of OD in the coming months.

CLAPTON

samwardill wrote: »

I don't see why the insurance parallel is not relevant. Although the cost of insurance is less than £8k, the cost of the risk of giving a £8k overdraft to someone who has a proven capability of managing it is much lower than the normal cost of an insurance policy.

I'm not sure why no bank should consider offering a £8k overdraft to a new customer. If I applied for a credit card I'd generally be offered a £5-10k credit limit.

I'm not talking about a regulation that says overdrafts must be offered like for like. I'm just talking about a general principle that they should.

you are completely missing the point

there may well be banks that will give you a large OD as a new customer given your excellent credit history and very high income;
it's just that you are a cheap skate and have choosen a bank, not because it attracts high worth individuals but because you want cheap holiday money.

again the wonders of the reasonably competitive market place that offer different product mixes to attract different types of customers.

seriousDFW

samwardill wrote: »

I don't see why the insurance parallel is not relevant. Although the cost of insurance is less than £8k, the cost of the risk of giving a £8k overdraft to someone who has a proven capability of managing it is much lower than the normal cost of an insurance policy.

I'm not sure why no bank should consider offering a £8k overdraft to a new customer. If I applied for a credit card I'd generally be offered a £5-10k credit limit.

I'm not talking about a regulation that says overdrafts must be offered like for like. I'm just talking about a general principle that they should.

I think we'll have to agree to disagree!

samwardill

CLAPTON wrote: »

you are completely missing the point

there may well be banks that will give you a large OD as a new customer given your excellent credit history and very high income;
it's just that you are a cheap skate and have choosen a bank, not because it attracts high worth individuals but because you want cheap holiday money.

again the wonders of the reasonably competitive market place that offer different product mixes to attract different types of customers.

I don't think that I am missing the point. I think that we have a difference of opinion. As serious DFW suggests "we will have to agree to disagree".

There are two reasons why N&P don't offer me an overdraft. Either:
a) They have a policy of offering lower overdrafts because they choose to offer other product features instead
b) They don't know me so don't want to offer me an overdraft until they have more information about me

I think that you are arguing that the reason is a) and I am arguing that it is b).

If it is b), and time will tell, then I think this is a barrier to switching accounts.

I wish the the market for current accounts were like the market for insurance which is now truly competitive because there are no barriers to switching. I think that it could be with some regulatory steer.

innovate

samwardill wrote: »

I wish the the market for current accounts were like the market for insurance which is now truly competitive because there are no barriers to switching. I think that it could be with some regulatory steer.

If you are seriously suggesting that all companies must be accepting the same risk - dream on. No insurance company is obliged to take you on. But apart from that, the risk on an insurance policy is miles different from the risk on an overdraft, so you are comparing apples and pears.

seriousDFW

samwardill wrote: »

I don't think that I am missing the point. I think that we have a difference of opinion. As serious DFW suggests "we will have to agree to disagree".

There are two reasons why N&P don't offer me an overdraft. Either:
a) They have a policy of offering lower overdrafts because they choose to offer other product features instead
b) They don't know me so don't want to offer me an overdraft until they have more information about me

I think that you are arguing that the reason is a) and I am arguing that it is b).

If it is b), and time will tell, then I think this is a barrier to switching accounts.

I wish the the market for current accounts were like the market for insurance which is now truly competitive because there are no barriers to switching. I think that it could be with some regulatory steer.

Nobody knows N&P's business strategy so no-one is suggesting it is either a or b; both are possible explanations.

What you are suggesting is illogical and in my view paradoxical. If there was regulation to match OD's in the same way as insurance in order to maximise competition through ease of switching, I think the opposite would happen: banks would be reluctant to take on new customers because they would be forced to give an overdraft higher than the one they would otherwise have given. It just doesn't make sense, sorry.

JuicyJesus

samwardill wrote: »

If it is b), and time will tell, then I think this is a barrier to switching accounts.

It is a barrier, but it's a self-inflicted barrier. If you choose to run up a massive overdraft you can't easily repay with a bank, I see no reason why any other bank should accept that level of risk.

Overdrafts are intended for short-term use only. If you live in one then you cannot seriously expect that to continue indefinitely, or expect other institutions to want to take it on.

samwardill

innovate wrote: »

No insurance company is obliged to take you on.

No bank provider is obliged to take you on either.

innovate wrote: »

the risk on an insurance policy is miles different from the risk on an overdraft, so you are comparing apples and pears.

I agree that the risk to insurance companies is different. It is much higher (running into millions). Should this not make it easier to do this with bank accounts?

samwardill

JuicyJesus wrote: »

It is a barrier, but it's a self-inflicted barrier. If you choose to run up a massive overdraft you can't easily repay with a bank, I see no reason why any other bank should accept that level of risk.

Overdrafts are intended for short-term use only. If you live in one then you cannot seriously expect that to continue indefinitely, or expect other institutions to want to take it on.

I rarely use my overdraft. I just make lots of large transactions and I want an authorised overdraft so that I don't have to keep a large balance in my current account to prevent going unauthorised and incurring extortionate fees.