MSE News: Banks pledge to provide data that may help you find your perfect account

Archi_Bald

JimmyTheWig wrote: »

So you think it would be relatively easy to work out how much interest you would earn over the course of a year with, say, the Santander 123 account?

Yep, dead straight forward to do.

Herbalus

JimmyTheWig wrote: »

So you think it would be relatively easy to work out how much interest you would earn over the course of a year with, say, the Santander 123 account?

Yes. In fact, Santander provide a handy calculator to allow you to do just that: here it is.

If your query is about the actual account balance you had last year and how much interest you would have got with them, that's purely an academic exercise and doesn't help, because you dont know that this years finances will be the same. What happens when you water bill goes up, or you start dating again, or you suddenly need a new car?

Archi_Bald

The Santander calc is indeed a nice gadget if people want to get an idea of how much they could perhaps make.

But to compare the interest paid (or charged) by a given set of accounts, you don't really need to work out what the amounts are in £££ for each of the accounts. You just compare the AER / APR.

I suppose some people would be looking for magic answers on how much they would have to pay in charges if they went overdrawn. Again, that's relatively easy to compare between accounts by just looking at the charges documents each provider publishes. It is virtually impossible to produce a definitive answer in terms of £££ because there are an almost infinite number of variables. So any calculator will only be able to give some rudimentary comparison - - - one that you can make by just looking at a table of charges.

JimmyTheWig

Archi_Bald wrote: »

It is virtually impossible to produce a definitive answer in terms of £££ because there are an almost infinite number of variables.

If you used your last year's bank account balances and transactions, etc, then this would be a pretty good indication of the year to come.

Herbalus wrote: »

If your query is about the actual account balance you had last year and how much interest you would have got with them, that's purely an academic exercise and doesn't help, because you dont know that this years finances will be the same. What happens when you water bill goes up, or you start dating again, or you suddenly need a new car?

I accept that my finances this year won't be exactly the same as my finances last year. Just like my energy consumption won't be exactly the same this year and last year. But if I am going to compare energy suppliers then I will use my last year's usage to get the most accurate figures for me. It might be a colder winter this year, or an elderly relative may come and stay and need the heating turned up. But at least as a starting point the last year's usage is a pretty good approximation.

Likewise I am pretty sure that my bank balance in the next year will be more like my bank balance was in the last year than, say, Alan Sugar's bank balance was in the last year or, say, a family on benefits' bank balance was in the last year.
I am probably going to go overdrawn about the same number of times and by about the same amount this coming year as I did last year.

I accept that it would be impossible to build a calculator that answers "what bank account will be best for me in the coming year?" But a calculator that answers "what bank account, on the current rules, would have been best for me in the last year?" wuold still be a pretty useful tool.

JimmyTheWig

Herbalus wrote: »

Santander provide a handy calculator to allow you to do just that: here it is.

Ok, lets take a simple example.
£3000 salary comes in at the start of the month.
£3000 bills go out half way through the month.
£1500 remains in the account as a minimum.

So half the time there is £1500 in the account and half the time there is £4500 in the account.
Santander asks "Your balance: how much is usually in your account?". What should I put in? An average of £3000, I presume.
They tell me I'll get £89 interest. (I don't know why it doesn't say £90.)

But that's not the case. I'll actually only get £72.50 as half the time I'll only be getting 1% interest not the 3% that my average balance suggests.

And this is, obviously, a simple example. It was easy for me to calculate the real interest figure. But for most people bills don't come out of the account all in one go. So how would you calculate it?

Archi_Bald

It's easy.

A bank account that pays 3% AER on balances >0 will pay you more interest than one with 0% AER and is therefore "better" for anyone with a balance > 0.

A bank account that pays 5% AER will pay even more interest than either of the above, so is "better" still.

JimmyTheWig

Archi_Bald wrote: »

It's easy.

A bank account that pays 3% AER on balances >0 will pay you more interest than one with 0% AER and is therefore "better" for anyone with a balance > 0.

A bank account that pays 5% AER will pay even more interest than either of the above, so is "better" still.

Yes that should be the case. Though if the interest rates are tiered the AER will be dependent on significant assumptions.

But more relevantly, what's better - an account that pays 3% AER on balances > 0 or an account that pays no interest but gives you £5 a month each month you don't go overdrawn?
The answer to that will depend on how much money is in your account at the end of each day.
And I still think a good approximation will usually be the balances from last year.

It would be possible to work out manually with a year's worth of statements, but would be very time consuming and quite tricky.
It may be easy enough to approximate based on some simple assumptions about your usage.
But would be even easier if the data was provided in a way an online calculator could read and work out for you.

Herbalus

JimmyTheWig wrote: »

But more relevantly, what's better - an account that pays 3% AER on balances > 0 or an account that pays no interest but gives you £5 a month each month you don't go overdrawn?

Simple maths will tell you that. For example with Santander 123, £3000 at 3% will give you £7.50 per month. £2900 will mean 2% so a monthly return of ~£4.83 per month, before tax, so £6 and ~£4 after basic rate tax. That's not a big difference, so I would suggest that if your average is about £3000, sometimes more and sometimes less, then that's more or less the same as Halifax. (You can never know what your balance will be, so there's little use in knowing the exact figures. Add direct debit cashback and the fee into your calculations, and most people should be able to work out which is better without a huge government investment.)

JimmyTheWig wrote: »

But would be even easier if the data was provided in a way an online calculator could read and work out for you.

Are you suggesting you're happy to give your detailed financial account usage to an online calculator? Happy to give your consent for a third party to access your data from your bank?

Archi_Bald

Herbalus wrote: »

most people should be able to work out which is better without a huge government investment.

That is precisely the point. It's not as if there aren't a lot lot of hugely more pressing issues on which tax payers' money should be used.

If they want to do anything about helping people to pick a suitable current account, perhaps they could use the money to educate the teachers that are supposed to educate the kids on personal finances.

JimmyTheWig

Herbalus wrote: »

Are you suggesting you're happy to give your detailed financial account usage to an online calculator? Happy to give your consent for a third party to access your data from your bank?

Depending on what data and what website then yes.
But I can appreciate that others might not want to do so.

Which combined with your point about the cost becomes a valid argument.
What's the point in spending a lot of money for something that will be of some benefit to some people?
I don't think it needs to be a costly exercise. They need to decide what data should be available, what format that data should be in and how to get that data to the customers. Once that is done it should be reasonably straight forward for the banks to write routines to output the data.
Then it's up to the likes of MSE to read and interpret the data.
Sounds simple enough to me, but if it is going to be an expensive project then I'm happy to consider it a bit of a white elephant.