Current account charges for everyone?

Garnet_Gem

Some financial journalists are predicting that once the banks have sorted out the bank charges refunds (or no refunds) they will definitely charge everyone who has a current account, whether they are overdrawn or in credit. I have 2 current accounts so I would close down one rather than pay double charges. Is there any way around the fees if they're imposed on us all? Are there any savings accounts that supply a debit card?

Lavendyr

I expect that, like First Direct have already done, it will be possible to have a current account for free if you meet certain criteria, e.g. if you pay in over a certain amount each month, if you have another product with them (mortgage/loan/CC), if you have a certain amount in savings/investments.

To be honest I wouldn't worry too much until it happens, the financial journalists cannot know the future any more than anyone else can. See what your banks come up with, if they come up with anything, and make up your mind what you'll do once you know.

HTH

Tim_L

Won't happen. For every bank that would like to charge there is another looking to poach customers. If the UK banking sector wasn't so competitive there would be charges by now anyway.

What the banks are trying to do with charges is (a) use the situation regarding refunds of charges to create a climate where reclaimers can be used as scapegoats, (b) talk up the idea of charges as if it's inevitable so that they become more acceptable, and (c) attempting to persuade people to 'upgrade' to premium or 'select personal' accounts which are charged.

What is true that if banking costs money over and above the amounts bank make from holding deposits, the person paying the charges should be the person operating the account, not someone else in marginal difficulties.

But as I say, it's not going to happen. This time last year people were prophesying general charging this time this year.

realaledrinker

Like credit card fees for 0% BTs would never happen because of the competitiveness of the market ........

nearlyrich

I think it might happen and if it does I would rather pay £10 a month to First Direct than one of the other banks like Halifax, Lloyds TSB or Natwest.

Having said that I prefer not to have to pay and hopefully FD will continue to offer fee free banking to customers who meet their conditions which are hardly rigorous.

Tim_L

No-one ever said as far as I know that there would be no balance transfer fees.

There is a fundamental difference between bank charges and balance transfer fees, in that balance transfers are a marketing tool designed to build market share, and were designed at a time when interest rates were very low. Organisations have marketing budgets to pay inducements to customers to switch, but it was inevitable that as stoozing became somewhat mainstream and interest rates rose the rules would become more restrictive. I certainly remember discussing this with active stoozers two or three years ago, and we felt at the time that transfer fees would be more likely.

Charges for running current accounts are different. They are designed as an income stream, not a marketing tool. Be under no illusion: if the banking industry felt they could make these charges they would already be doing so, regardless of what is happening with respect to refunding of charges on "unauthorised" overdrafts. Banks do not have a pool of ideas that they hold back on because they think they're making enough money elsewhere, they will apply any idea they think they can make work.

Interestingly, the way charges have been applied by FD is essentially as a marketing inducement. You don't pay the charge if you have another FD product, so the cost of the inducement to take the second product is removed but is still perceived a benefit to the customer. It's a neat trick.

The problem banks have in wanting to impose charges is that the market for current accounts is extremely competitive. Banks would probably want to work as a cartel, but they can't really, and the smaller banks want market share so will produce products without charges. It amuses me that most banks now offer 'premium' accounts or 'select personal banking' to induce customers to think they will get a more exclusive product by paying for it, it's a nice commentary on vanity really.

But the fact of the matter is that if banking costs more than a bank can generate in profit from the money in an account plus any interest the account holder pays for an overdraft, then it's right and proper that the bank account holder pays the charge, not some random person who happens to be in marginal difficulties.

Tim_L

Actually there's an irony here too, which I think a lot of people have missed.

If banks had to choose one group of customers to keep, they would most certainly choose to retain the customers who do not manage their money well, those who bump along around their overdraft limit, rather than the people who manage their accounts carefully and prudently. Bluntly it is easier to make money from people who don't care much about it, and this is true with or without unauthorised overdraft fees.

In fact if there is one group of customers that do make charging more likely it is those people who carefully manage money and ensure that they get the best savings rates for excess cash and never go overdrawn. There are lots of posts on this board indignantly explaining how easy it is to manage your bank account and avoid unauthorised overdrafts, yet if everyone actually did that, bank profits would be significantly reduced and generalised charging would be inevitable.

The reason this has come up now is that banks have briefed the journalists involved, much the same as when politicians brief journalists. It allows ideas to be leaked out without being specifically attributable - if there were general plans to make charges then there could be an announcement. It's a kite flying exercise in short.

meggles

in the US most banks do charge for their current (called checking) account. of course there are ways to get out of it but it's the norm.

Mark7799

Tim_L wrote: »

Actually there's an irony here too, which I think a lot of people have missed.

If banks had to choose one group of customers to keep, they would most certainly choose to retain the customers who do not manage their money well, those who bump along around their overdraft limit, rather than the people who manage their accounts carefully and prudently. Bluntly it is easier to make money from people who don't care much about it, and this is true with or without unauthorised overdraft fees.

From my, admittedly fading, experience in banking, I would disagree with that part of it. I believe the Banks would rather have the customers whose accounts do not need much managing by the Bank because they can look to sell them the add-on products (fee paying accounts, insurances, loans etc). Those they don't want will be the ones who need to have time spent on their accounts and usually haven't got spare cash to sell products to. If, as seems likely, these fees will be greatly reduced then there will be even less desire by the Banks to want to retain them and the services they can access will be reduced/criteria needed to access them be increased.


In fact if there is one group of customers that do make charging more likely it is those people who carefully manage money and ensure that they get the best savings rates for excess cash and never go overdrawn. There are lots of posts on this board indignantly explaining how easy it is to manage your bank account and avoid unauthorised overdrafts, yet if everyone actually did that, bank profits would be significantly reduced and generalised charging would be inevitable.

See my comment above. I do not think generalised charging will come in - the barrier for 'free' banking will be raised instead. I totally agree with your point about money management though:T

The reason this has come up now is that banks have briefed the journalists involved, much the same as when politicians brief journalists. It allows ideas to be leaked out without being specifically attributable - if there were general plans to make charges then there could be an announcement. It's a kite flying exercise in short.

...............

gt94sss2

The Economist has an article this week on this issue and on what a good deal we have in this country compared to most others.

You may find it interesting.. especially the graphic/chart

Regards
Sunil

daveyjp

Abbey are introducing unauthorised overdraft service fees (not penalties), no doubt to avoid having to charge eveyone.