Where does your money go?

Charis

I pay my credit card bill by direct debit every month. Realising I had was near my credit limit, I phoned the company to make an extra payment, just in case. No deal. It takes four days for the money to go from my account to theirs so a payment today will make no difference.

I looked on my online bank account and money is due to go from my account tomorrow. It has already technically left my account as the balance has been adjusted. Have you ever wondered who benefits from the four days it is not in your account once you have actioned a payment? You can't spend it, as it has gone from your account. The payee can't spend it, as they haven't received it. Multiply this by every transaction anyone ever makes and imagine the interest the banks get on this 'black hole' account in which all our money spends a four-day interest-gaining holiday for the benefit of the bank.

It takes seconds to process a payment electronically. Four days was probably the time it used to take for a cheque to be delivered, read and processed. This is an anachronism which should be rectified as we have not given the bank permission to borrow our money.

In my case, although I have technically paid as I no longer have the money, I may now be liable for charges from the credit card company because the delay in receiving June's payment will push me over the agreed limit by a few pounds. The bank will gain interest of a few pence, which means I incur a penalty of several pounds. The bank and credit card company both gain financially. Only the customer loses. :mad:

jonesMUFCforever

And who pays for the equipment and staff needed to run the system to enable your card to work (which is sent to you free of charge!) ?

If you are too close to your credit limit only one person is responsible and it is not the bank!

dunstonh

The electronic bacs system was bolted onto the back of the cheque clearing system. It gets its own dedicted system next year which will see next day clearing (was meant to be this year but it has taken longer than expected).

The clearing cycle can work for you as many banks pay interest from the day you pay a cheque in. So, if you pay a cheque into your savings account you are earning on it there plus you are earning interest on your current account. Giving you double interest for 3-4 days.

imagine the interest the banks get on this 'black hole' account in which all our money spends a four-day interest-gaining holiday for the benefit of the bank.

You should see the bill for running BACs. Who pays for that?

In my case, although I have technically paid as I no longer have the money, I may now be liable for charges from the credit card company because the delay in receiving June's payment will push me over the agreed limit by a few pounds. The bank will gain interest of a few pence, which means I incur a penalty of several pounds. The bank and credit card company both gain financially. Only the customer loses. :mad:

Not the bank's fault. Its yours for not paying your bill on time. The credit card company can charge you because you didnt pay on time. The money has left the bank on the first day and will be with the bank of England on the second so they arent gaining on it either. Money in transit doesnt earn the amounts you appear to think it does.

You could have paid by debit card as then the system works in your favour as the debit card transaction can take a few days to come off your account whilst the credit card company gets the credit that day. You would have benefited from that though and that doesnt really work for you when you are blaming others for your error.

emmalt

Whilst I agree that it is not the fault of the bank or credit card company that the payment is late (BACs has always taken three days to clear) I don't understand either where the money goes.

There was an article a few years ago about the clearing system and how much the banks are making from it (i'll see if I can find it). Quite a scam actually.

Some banks do pay you interest on the day a cheque is paid in but this is a recent thing.

As for who pays for it - come on - don't make out that the banks are struggling to pay for it! Have you seen their profits!

emmalt

http://news.bbc.co.uk/1/hi/business/3007778.stm
http://news.bbc.co.uk/1/hi/business/3009678.stm

dunstonh

As for who pays for it - come on - don't make out that the banks are struggling to pay for it

Paying for it and struggling are two different things.

Have you seen their profits!

Most of which is made outside of the UK. Plus a business is entitled to make a profit.

UK banking is currently dirt cheap currently. You wait until a few years time when free banking has ended. Most will be worse off than they are now.

emmalt

When you pay by credit card it goes through an authorisation process. Over the phone in real time. If you don't have enough credit it is refused.

If you pay something via internet banking it takes three days for the payment to reach the intended person. You can see on line that you have enough money (I have an available column) so the bank knows that there is enough money there. So why does it take three days?

A cheque is different but electronic payments - come on.

As for profits, I know a lot is made overseas but a lot is made from the retail market selling customers things they don't need. You know longer have bank clerks they are sales people.

Banks, utility companies, insurance companies are all ditching customer service in favour of profits.

emmalt

Actually if the bill for running BACs is so high maybe it is time they reviewed the process. Maybe there are too many cogs in the wheel causing a delay in processing and costing more money.

dunstonh

So why does it take three days?

As has already been said, its because it was bolted on to the existing legislation and processes for the paper bacs system

Actually if the bill for running BACs is so high maybe it is time they reviewed the process.

As has been said, the replacement is being built. Legislation is already in place and whilst it was intended to be rolled out later this year, it has been put back to next year to sort some teething problems. Some of the changes will occur this year though.

emmalt

Lets face it the banks were quite happy for it to take three days to clear. They can make money from interest whilst in sits in the ‘blackhole’. Customers have got wise to this and are questioning the process so now they are improving it.

If it hadn't been questioned the process would never have changed.

Yes banking is dirt cheap - if you stay in the black. On the continent they borrow a lot less. Preferring to save up before they buy. They may pay for their banking but save a lot of money in the long run not paying interest on loans etc. Banks over here make a lot of money out of credit which easily funds free banking.

Also they have reduced admin by pushing internet banking. We do the data entry for them.

For banks it is all about reducing cost - not so that their products become cheaper but to maximise profit. Customer service has suffered as a consequence.

Rant over!

dunstonh

You have no arguements from me on those last points but the industry is consumer driven. People want cheap before service (in general).