Is it time to end ‘free’ banking?

*MF*

Should we perhaps be far more aware of what may be in store - article from Canada - showing how Banks can conceive of the many many ways to charge fees.

"Fed up with fees" article - here:

http://www.montrealgazette.com/business/with+fees/6681623/story.html

MoneySaverLog

Let there be free banking and anyone foolish enough to pay £1/£2 a day for a OD do so.

keet83

Many of the current accounts don't offer a decent interest rate, some don't offer any, to match inflation therefore even when we are in credit we are still "being charged".

If they do start charging then they should stop the ridiculous overdraft charges and extortionate interest charges; especially Lloyds with their up to £85 plus interest each month.

yuppysoul

keet83 wrote: »

Many of the current accounts don't offer a decent interest rate, some don't offer any, to match inflation therefore even when we are in credit we are still "being charged".

That doesn't make any sense at all.

You aren't "being charged" at all. Inflation has nothing to do with being charged. You may not think it's a good deal, but you aren't being charged at all.

If your boss just paid you in cash and you just collected your money from them is that "being charged" because you don't get interest for inflation? of course not.

Plus, there are added benefits to having a bank account. Using your card in the supermarket, ATM machines. All free services.

Fairoaks

Many pensioners are forced to have a bank account simply to receive their state pension which may be a meagre amount. They may have no direct debits or other use for a bank. Why should they be charged for letting the bank borrow their money, interest free, until they can get to a branch to withdraw it? A £15 a month fee could represent a large percentage of their income - in return for what? Another scenerio - a customer leaves a basic balance in their account & have no transactions for several months. Meanwhile the bank chips away at this balance until the account is overdrawn & then starts charging overdraught fees despite the customer making no withdrawals. 'Free' banking should remain for those who keep to the rules.

sim42

A banking system takes money from savers (and pays them interest) and then lends that money out at a higher rate and takes the difference as profit. This forms only a tiny amount of it's profit however.

As the bank lends out (say) 10 times (10x) the amount it receives from savers (this is the 'money-multiplier'), the bank will also receive the interest on it's receipts again 9x over. Thus, if it pays say 1% to savers and charges 5% to borrowers, the bank makes a profit of (5-1) + 9x5 = 49% a year!!

That sounds like an awful lot of money doesn't it. But in fact banks make EVEN MORE than 49% profit on their receipts. The bank loans out 10x it's receipts, BUT, when someone borrows that money they will usually buy something with it (after all, why borrow?). The vendor of those goods & services then puts this money in the bank, whereupon it gets loaned out 10x again! Of course the bank then makes another 49% profit on the SAME MONEY!

The overall effect of this is that with a money-multiplier of 10x (and this is conservative), the maths works out such that the banking system will end up putting 100x the value of receipts into the system, and thus making 49*10 = 490% per annum profit without fees!

Non-corrupt banks can therefore make around 490% profit on your savings every year and do not need to charge 'fees' to fleece their customers.

Unfortunately we have a corrupt banking system, and a government that's in their back pocket.

I highly recommend watching these videos, they explain how banking works in laymans terms and show, as does the above (if what I claim seems unbelievable to you), how the banks create (and make) vast sums of money from the money they create.

(I can't post links, copy and paste the links with www. into your browser to view)

How banks/fiat money works
youtube.com/watch?v=hx16a72j__8&feature=player_embedded

Moneyweek article/video
youtube.com/watch?v=cs1bkpxzBZI

keet83

yuppysoul wrote: »

That doesn't make any sense at all.

You aren't "being charged" at all. Inflation has nothing to do with being charged. You may not think it's a good deal, but you aren't being charged at all.

If your boss just paid you in cash and you just collected your money from them is that "being charged" because you don't get interest for inflation? of course not.

Plus, there are added benefits to having a bank account. Using your card in the supermarket, ATM machines. All free services.

Lets make it easier to understand.
If you have a current account at 5% with £100, inflation is at 10%,
if you keep that £100 in the bank account for a year you will then have £105 however your average shopping basket of £100 a year ago will have increased to £110,
therefore keeping your £100 in the bank account has cost you £5

This has been occurring for a long time now as many current accounts are only 0.1% in credit and a lot of people don't realise that this is actually costing them

stevemcol

I feel qualified to give an impartial view here. When I was younger, I lived my life in overdraft, often exceeding the agreed limit and being charged. I learnt that it was no way to continue and all the incurring of charges, through my own fault, was just making matters worse. With my wife, we got our heads down for a year or so, living on beans on toast etc, cleared the overdraft, never looked back. The bank actually helped me work to a plan to help me clear my overdraft (Nat West then).
I have no problem with the charges the banks imposed on me. It basically sorted me out, like a sharp smack on the wrists. I now enjoy free banking and would urge everyone to work to the same goal. The banks are transparent in my view, stay in credit, it's free, go into overdraft, there's interest, and for unarranged borrowing, you'll get nailed.

keet83

Another thing to look at is that they charge us to borrow "their" money, why should they charge us for them to "borrow" our money?

tim1grimshaw

I work for a bank and i am in favour of paid banking so long as this puts and end to unadvised / informal OD 'limits'. Something that concerns me is that a limit means the end of something so if your OD limit is £100 then this is what it should be. If you attempt to go beyond this then it should be declined. If this was the case then people would soon learn that they have to run their accounts accordingly then we would have a nation of people that know how to run their finances.