Is it time to end ‘free’ banking?

penrhyn

keet is illustrating the effect of inflation on the future purchasing power of your £5.

keet83

When you put £5 in a bank account that is not in line with inflation then it will not 'actually' be £5 that you will get back a year later. The word 'free' is very losely used here.

It's the same as getting a payrise of 2% when inflation is 5%, you are not getting a 'real' payrise, you are infact getting a paydrop.

They wonder why Britons are in debt and this is one of the reasons why.

yuppysoul

keet83 wrote: »

When you put £5 in a bank account that is not in line with inflation then it will not 'actually' be £5 that you will get back a year later. The word 'free' is very losely used here.

It's the same as getting a payrise of 2% when inflation is 5%, you are not getting a 'real' payrise, you are infact getting a paydrop.

They wonder why Britons are in debt and this is one of the reasons why.

wow, somehow you think I don't get that. It's completely irrelevant to whether something is free or not.

It's not loose at all. If you don't pay for a service, this is called free.

You can argue until you are blue in the face that you are losing money blah blah.

It makes zero difference to whether it's free.

You may feel just because it's free it's stilll crap and you need something better. That's great, but it doesn't suddenly become not free because it's not beating inflation.

Taking all my money out of the bank and putting it in the sock drawer is also free.

If I leave it there for 10 years, it doesn't beat in inflation, I probably can't buy as much stuff with it as I would have been able to 10 years ago, it's probably a really stupid thing to do.

But at the end of the day, it's still free.

You seem to be suggesting I think free equals great. I don't. Free just equals free.

keet83

yuppysoul wrote: »

wow, somehow you think I don't get that. It's completely irrelevant to whether something is free or not.

It's not loose at all. If you don't pay for a service, this is called free.

You can argue until you are blue in the face that you are losing money blah blah.

It makes zero difference to whether it's free.

You may feel just because it's free it's stilll crap and you need something better. That's great, but it doesn't suddenly become not free because it's not beating inflation.

Taking all my money out of the bank and putting it in the sock drawer is also free.

If I leave it there for 10 years, it doesn't beat in inflation, I probably can't buy as much stuff with it as I would have been able to 10 years ago, it's probably a really stupid thing to do.

But at the end of the day, it's still free.

You seem to be suggesting I think free equals great. I don't. Free just equals free.

The topic is about someone else 'looking after' your money and whether there should be direct payments made for it, not about if it is better to keep it in a bank or 'in the sock draw'.

I never said anything free is crap, you are simply trying to change the whole explanation that I am trying to give you. I never said you think free equals great, again you are misinterperating what I say.

If you buy a newspaper that you don't usually buy just for a voucher for a free drink, the drink is not actually free as you bought the newspaper to get the free drink.

Having 500 minutes and 100 messages free on a mobile phone contract for £20 a month again is not free, it is £20 for the minutes and messages.

£12 for free mobile insurance, free travel insurance, etc. With a current account, wrong it is not free it is all £12 a month.

'free' is a word that is wrongly used in different ways all the time, free banking is one of them.

You can agree or disagree with me if you want, it doesn't matter to me. All I am trying to do is explain to you how banking is not actually free even though there are no direct charges.

stevemcol

keet83. In isolation, your analogies are correct; I just don't think they're good analogies. Buy a paper, and the money is gone, spent; similarly with a phone contract, you have spent money that will be retained by the vendor.
£10 money in a current account will still be £10 in 10 years. The bank hasn't taken a penny though will certainly have profited by lending it, but that isn't your argument. The fact that your £10 won't buy as much in 10 years is not a charge levied by the bank; it's just an unfortunate consequnce of economics.
I think you are flogging a dead horse with your argument.

yuppysoul

keet83 wrote: »

The topic is about someone else 'looking after' your money and whether there should be direct payments made for it, not about if it is better to keep it in a bank or 'in the sock draw'.

I never said anything free is crap, you are simply trying to change the whole explanation that I am trying to give you. I never said you think free equals great, again you are misinterperating what I say.

If you buy a newspaper that you don't usually buy just for a voucher for a free drink, the drink is not actually free as you bought the newspaper to get the free drink.

Having 500 minutes and 100 messages free on a mobile phone contract for £20 a month again is not free, it is £20 for the minutes and messages.

£12 for free mobile insurance, free travel insurance, etc. With a current account, wrong it is not free it is all £12 a month.

'free' is a word that is wrongly used in different ways all the time, free banking is one of them.

You can agree or disagree with me if you want, it doesn't matter to me. All I am trying to do is explain to you how banking is not actually free even though there are no direct charges.

But it is free. You are just deciding it's not because you don't like the terms.

If you "buy" a paper it's not free. The key word here is buy.

What did I buy to get my bank account? I paid nothing. That's free. To say it's not free because you think you should get more or are losing out just isn't accurate.

there are no direct charges or indirect charges because there are no charges at all.

psdie

Silly poll - what on earth makes anyone think the banks would stop pushing money making products just because they've covered their AC management costs?! Or that they'd reduce the fees on totally unrelated products like mortgages?

Banks already make money from the difference between the interest they pay on positive balances (usually zero or negligible for current accounts) and the return they receive from investing / leveraging / lending those balances.

Is MSE going to start advocating a return to charged cash machines in order to be "more transparent"? Bizarre!

UPDATE: Apologies, Martin points out later in this thread that the poll isn't meant to endorse the change - they just needed to use neutral language in order for the poll results to be fair. Indeed Martin personally appears to oppose the change, using similar language to mine: "What I find bizarre is the argument that 'end free banking and banks won't flog or cross sell inappropropriate products any more as they won't need to'."

psychic_teabag

I'm happy to forgo current-account interest in lieu of a fee. If they paid me interest, I'd have to pay tax on it before paying it towards the fee, which would be a pain.

Or would they offer to take the free from pre-tax interest, like a sort off offset thing.
I suppose such an arrangement might require maintaining a minimum (average) balance, but that would be okay - don't then have to worry too much about whether there's enough in the account to pay bills (which is one reason I like my Lloyds vantage account).

I find it odd that FD, Halifax, Lloyds, Nationwide, etc funding requirements for perks are based on how much is paid in per month, even though you can just take it straight out again and they presumably make nothing at all from it.

Anthorn

Looks like I'm in the minority here because I support a monthly fee but provided it covers all charges. But I think the banks would treat the monthly fee as extra profit and continue with the charges. It would make more sense in the current economic climate if there was a minimum balance requirement which would make such accounts viable only for those who are always in credit.

I remember some time ago Barclays offered an account with a monthly fee but all they were offering was what other banks were offering for free when in credit.

I support a previous post where a limit means a limit and debits are declined if the overdraft limit would be exceeded or indeed if there were no overdraft facility. It is something of a misrepresentation when banks issue a limit and then allow customers to go over limit and then make hefty charges as penalties and also issue a red notice on that customer's credit file.

I don't support a previous post in which it is said that some people would be locked out of bank accounts if there was a monthly fee: If Basic bank accounts are what they intended to be - a place to have wages or benefits paid into, to pay direct debits and standing orders, a means to withdraw cash and no credit - then no-one would be locked out. The problem the banks have in offering such accounts is that there are no charges levied and hence no profit for them so the Basic Bank Account idea has been changed and expanded beyond recognition.

stevemcol

It's a point to note that it would be easier for the banks to enforce an absolute overdraft limit now, or in the near future with the demise of cheques and cheque guarantee cards.
In my younger days, writing cheques was the way I ended up beyond my agreed limit since they aren't processed real time and difficult to block.