2015 - No fee bank accounts. Where are they?

Ballard

eDicky wrote: »

And the reality is that banks make healthy profits, plain for all to see in their annual reports, easily covering the expenses of providing retail banking without charges.

When banks do fail it's because of incompetent management, bad strategy, rogue traders, etc, not because they are not charging their retail customers enough.

Of course they will try to gouge as much income as possible from customers and the only limitation to their doing so comes from regulation and the 'agreements' with government, such as the current one to offer basic free banking for all. The banks' having any real difficulty to afford to do so is an amusing notion.

I don't think that anyone is arguing that the banks can't afford it. The point being made by some is that running current accounts isn't cheap and so basic bank accounts cost them money. Are there any other private businesses that are obliged to serve customers at a loss?

As I've said in a previous post, I think that it's fair enough to make the banks provide these accounts because, as you point out, they make enough money elsewhere.

colsten

eDicky wrote: »

And the reality is that banks make healthy profits, plain for all to see in their annual reports, easily covering the expenses of providing retail banking without charges.

You could apply the same logic (?!) to other businesses - e.g. should supermarkets provide free milk / bread / apples because it's plain to see they are making profits that would easily cover the cost?

absolutereturn

Ballard wrote: »

I don't think that anyone is arguing that the banks can't afford it. The point being made by some is that running current accounts isn't cheap and so basic bank accounts cost them money. Are there any other private businesses that are obliged to serve customers at a loss?

Where do you get the idea from that running current accounts costs a lot? Most services are automated and once the systems are set up, new users can be added to the system at no extra cost. It's just like this forum, we don't have to pay to use it because we can register and post without the need for human intervention. There are people who oversee the site just like there are bank employees but the current system can accommodate more users without the need for extra investment or more staff. Needless to say, it comes to a point where another server or an extra staff member will be required, but that will be enough to handle thousands of new users.

There is no special system for basic accounts, they use the same as the accounts with overdrafts and other trimmings that the banks make money from, only with different settings. Once people have had the account a few years and are having a certain amount paid in, they could be easily upgraded with a small overdraft to start with, if all goes well they can offer you a credit card with a modest limit, etc.

Ballard wrote: »

As I've said in a previous post, I think that it's fair enough to make the banks provide these accounts because, as you point out, they make enough money elsewhere.

...and because there is the potential to make money from them as well. People's circumstances do change!

colsten wrote: »

You could apply the same logic (?!) to other businesses - e.g. should supermarkets provide free milk / bread / apples because it's plain to see they are making profits that would easily cover the cost?

No, you couldn't apply the same logic. Products and services are very different. Supermarkets have to pay for every pint of milk or loaf of bread they buy. Banks are not giving you anything for free, on the contrary, you are letting them use your money. Even if you have only a few hundred in the bank, multiply £500 x 1000 customers and you have half a million. If you look at the fractional reserve banking post above, you'll see how banks can lend many times that amount and get paid interest for the privilege.

They can also invest your money elsewhere. Having working capital available is a privilege few businesses have and most would love. Warren Buffet has always liked the insurance business precisely because of its availability of capital to invest. When you put your money in a bank you are doing pretty much the same, providing the bank with capital to work with. What benefit would the supermarket get from giving away free food they've had to pay for? There's just no comparison whatsoever!
http://www.wsj.com/articles/warren-buffett-re-examines-reinsurance-1435876468

Mr. Buffett has always liked insurance because buyers—be they car owners, businesses or insurance companies—pay premiums upfront, while claims often can be paid out much later. Berkshire is able to invest the funds for its own benefit in the interim. Mr. Buffett calls these funds “float.”

colsten

absolutereturn wrote: »

No, you couldn't apply the same logic. Products and services are very different. Supermarkets have to pay for every pint of milk or loaf of bread they buy.

you think providing services cost nothing?

absolutereturn wrote: »

Where do you get the idea from that running current accounts costs a lot?

Where do you get the idea from that it doesn't cost a lot?

Ballard

colsten wrote: »

you think providing services cost nothing?

Where do you get the idea from that it doesn't cost a lot?

I give up. It doesn't cost anything to mail statements etc., provide a debit card, top up ATMs, replace damaged hardware, upgrade software.

Someone with £120 in their account earns the bank tens of thousands a day. All you have to do is look at the post earlier. It all makes sense now. I've been such a fool.

absolutereturn

I'm not going to argue anymore, I'd just like to ask, why do you guys think it's OK to use this forum (and many others) as well as free email services like hotmail, gmail, etc., use all of Google's services, Facebook and other social media, all without paying a penny, yet banks should be paid to let them have our money?

What makes you think it doesn't cost anything to run MSE, Google, Facebook, etc.? They employ lots of people and have a lot of hardware and software to replace and upgrade, yet we can use their services free of charge, without even letting them use a penny of our funds. Just a thought, uh?

Ballard

absolutereturn wrote: »

I'm not going to argue anymore, I'd just like to ask, why do you guys think it's OK to use this forum (and many others) as well as free email services like hotmail, gmail, etc., use all of Google's services, Facebook and other social media, all without paying a penny, yet banks should be paid to let them have our money?

What makes you think it doesn't cost anything to run MSE, Google, Facebook, etc.? They employ lots of people and have a lot of hardware and software to replace and upgrade, yet we can use their services free of charge, without even letting them use a penny of our funds. Just a thought, uh?

This is getting tedious so my last post on this...

Google, Facebook etc., all earn money from advertising. Without us using their services they'd earn nothing. Surely you realise that. I'm not sure about this site but possibly referrals.

bigadaj

colsten wrote: »

You could apply the same logic (?!) to other businesses - e.g. should supermarkets provide free milk / bread / apples because it's plain to see they are making profits that would easily cover the cost?

The simple answer to why should banks be forced to offer these accounts is because the government kindly bailed them all out, whether tacitly or implicitly since the gfc. Funding for lending has been the longer term sop, as we can't allow banks to fail. Supermarkets or any other business area, then that's just fine, but not banks.

It therefore doesn't seem unreasonable to ensure that banks put a tiny amount of this huge government, and we actually mean tax payer, subsidy to supply something that might be of social use, even though it might mean a little less for bonuses. It's a tough life for banks.

colsten

Ballard wrote: »

I give up. It doesn't cost anything to mail statements etc., provide a debit card, top up ATMs, replace damaged hardware, upgrade software.

Precisely. Nor does it cost anything to have hundreds of Branches that people can just walk into to transact against their current accounts. Or to employ people to answer the phones when current account customers call. Or to provide an insurance to all customers of up to £75K. Or or or or....the list of things that don't cost anything in the eyes of absolutereturn is endless.

colsten

absolutereturn wrote: »

What makes you think it doesn't cost anything to run MSE, Google, Facebook, etc.? They employ lots of people and have a lot of hardware and software to replace and upgrade, yet we can use their services free of charge, without even letting them use a penny of our funds. Just a thought, uh?

Neither myself nor anyone else has said, as far as I am aware, that it doesn't cost anything to run MSE, Google, Facebook, etc. . They finance the "free" services by income they make in some other way. MSE, for instance, make the vast amount of their money from referrals, as they declare in their "How this site is funded" article, and it is ver clever to allow free access to the site and the site's forum, as this increases the opportunity for MSE to make money.

It is you who - quite absurdly - keeps arguing that providing current accounts cost nothing / next to nothing. Although it seems you might now be making some sort of a u-turn and arguing banks should be funding no-charge current accounts from other income. This is very different from claiming there's no cost to providing current accounts.