MSE News: Bank switching 'hassle' must be eliminated, as full-scale current account

grumbler

Consumerist wrote: »

Since the "rich" customers (i.e. without any overdraft) don't pay for any of these services it must be ONLY the "poor" who pay. That is the injustice of the system which needs to be corrected.

'Rich' possibly pay even more by getting interest below inflation on their in-credit balances.

pinkdalek

You could argue that people will only switch if their bank fails them.

If it isn't broke then don't fix it.

Not everyone is motivated to a product because it has the best rate/cash incentive.

Some will like their bank because of the service they have received from them over the years.

Yes I appreciate there are rate chasers out there who move at the drop of a hat, but like with any industry there are those people who stay loyal because of how they have been treated well all this time.

Switching banks is easy, use the switch service, it has guarantees, if the bank fails you complain to them and demand compensating, it's the way of the world. You don't even have to switch in 7 days, it can be postponed for weeks in advance.

As for all this about credit worthiness, what nonesense, you can apply to practically any financial organisation for credit these days,, without any existing relationship at all.

Consumerist

Alpine_Star wrote: »

. . . The market study found that revenues derived from insufficient funds charges were £2.56billion compared to just £530million for interest charged on authorized and unauthorized overdrafts combined.

Yes, in 2006 the banks were not making enough from reasonable interest charges on overdrafts to cover the ficticious "free banking" so they introduced the fixed charge so that those with even small or occasional overdrafts would pay dearly. Perversely, we are now in a situation where long-term large overdrafts are relatively cheaper than the charges paid by those who dip into an overdraft occasionally.

Archi_Bald

There is, of course, one obvious way to avoid all those overdraft charges that you say are injust and subsidise those rich people. It is not compulsory to take out overdrafts, as I am sure you know.

Consumerist

Archi_Bald wrote: »

That's a pretty sweeping statement - who decides and polices who can afford it, and what "it" is? If you determine that those who don't have overdrafts won't have to pay bank/transaction charges, I think you will be in for one massive surprise. .

I refer to those who do not need to make use of overdraft facilities as those who can more likely afford it. A generalisation, I agree.

Who would suggest that those who don't have overdrafts won't have to pay bank/transaction charges. It's nonsense.

In a fair banking system, we would all pay in proportion to the cost of the services we use. That may well mean transaction and service charges as long as it also means overdraft charges which are proportionate in terms of amount and duration.

Consumerist

Archi_Bald wrote: »

There is, of course, one obvious way to avoid all those overdraft charges that you say are injust and subsidise those rich people. It is not compulsory to take out overdrafts, as I am sure you know.

Well, of course that is not entirely true. If you have insufficient funds for a transaction the bank will, at its own discretion only, force you to have an unauthorised overdraft whether you want it or not. I am sure you know this too.

The simple answer would be for the banks to refuse to pay any unfunded transaction. The banks, however, have rejected such an option.

Archi_Bald

If you are unable to have enough money in your account to pay your bills, that is again your own problem, and the possible consequences are known to you before the event. So it is your decision whether to take the hit.

If you don't want to be hit with unauthorised overdraft charges, get a basic account.

Consumerist

Archi_Bald wrote: »

If you are unable to have enough money in your account to pay your bills, that is again your own problem, and the possible consequences are known to you before the event. So it is your decision whether to take the hit.

If you don't want to be hit with unauthorised overdraft charges, get a basic account.

You know, as well as I do, or at least you should, that often it is merely a timing problem that leads people into unexpected overdrafts so it's not as simple as you are portraying. Perhaps that's your intention.

The basic bank account is becoming a rare option; many banks which used to offer them are withdrawing or have withdrawn their availability. In any case they charge unpaid transaction fees as a substitute for unauthorised overdraft fees.

Whilst I accept that those who go into overdrafts must expect to pay a reasonable charge, the current arrangements are heavily loaded against the occasional small overdraft.

I have no personal axe to grind here. I, like yourself, open current accounts with the sole intention of earning interest on my savings and don't have to pay too much attention to overdraft structures. But that doesn't mean that I think the current charging structure by banks is fair. Quite the contrary.

Joe_Bloggs

Consumerist posted:-

The simple answer would be for the banks to refuse to pay any unfunded transaction. The banks, however, have rejected such an option.

I think the banks have cashed in on the misery of those who can't pay their bills by adding there own additional charges that would not apply if in a no funds no payment situation. The supplier of the goods or service should seek redress with the consumer.

Too many consumers have stuck there heads in the sand when in financial difficulty. It surely benefits all minus the banks if budgeting and help on budgeting is given rather than levying banking charges for failed banking transactions and then letting the transaction progress.

J_B.

jamesd

The key things for me in priority order in the "switching" area are:

1. Cheap and easy opening of accounts so that I can try the products of different suppliers. A fee just for having an account would greatly inhibit this.
2. Easy selection of which direct debits or standing orders I want to switch from one account to another, whenever I want that to happen. Not on an all or nothing timetable set for industry convenience. I can authenticate to two different banks simultaneously, so let me do that and drag and drop the things I want to move from one to the other. Repeatedly, not just once.
3. Not switching. I don't necessarily want just one current account supplier. Redundancy for reliability is useful and each can have useful advantages. I currently have current accounts with three institutions. One tied to a mortgage, two for other reasons. I don't see the advantage to me in using only one supplier but I assume that the industry prefers an all or nothing tied customer approach.

So far as revenue goes, it's worth knowing that Hargreaves Lansdown reported making around 0.9% interest on uninvested money left with it. It can't use leverage but a bank can, so presumably can make more than that. Add merchant fees, other tied business like my mortgage and I wonder what the funding/cost breakdown really is between trouble-free mostly in credit customers and those systematically not, who probably have higher overheads for the bank. I'd be interested in knowing such things for each institution.