Downside to current account switching?

TickersPlaysPop

colsten wrote: »

TickersPlaysPop


Santander UK is ring-fenced from Santander Spain. The FCA would have to approve any funds moving out of the UK.

There is no Government scheme protecting your money in banks. It's the FSCS that does, and the FSCS is an industry scheme.

FSCS has very clear timescales by when how much money will be paid back - In most cases, for deposits, FSCS aims to pay compensation within seven days of a bank, building society or credit union failing. They will pay any remaining deposit claims, which are likely to be more complex, within 20 working days.

You can't compare FSCS with the Icesave situation - for starters, Icesave was not covered under a UK scheme.

Many thanks for your reply... to correct you...

Icesave at the time was covered by the protection at the time known as the "national deposit guarantee scheme". I never would have put the money offshore if there was no gurantee I'd get it back. The scheme was very simlar to the one in existance now, it was flawed and slow, and I would be very surprised if the FSCS could cope and honor the time frames if there was a large scale event.

Kindest regards :-)

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takman wrote: »

There is a very simply reason: it's all just marketing to attract new customers, it's as simple as that.

The banks based rate is 0.25% so anything more than that should be considered acceptable for a savings account. When they offer 5% interest on accounts they are actually loosing money by doing this so that's why they only offer it on small amounts of money. It's the same as them offering a £100 bonus to switch to them. When people see savings accounts offering at most 1.0% interest they think that accounts offering 3, 4, 5 or 6% interest are amazing.

The reason then have minimum pay ins is, direct debits, switching requirements etc is because they want customers to use these accounts as their main accounts. Once they has these customers they can offer them credit cards, loans, mortgages, overdrafts etc which makes them money.

So it doesn't annoy me to jump through hoops because if it wasn't part of a marketing scheme and there were no "hoops" then they wouldn't offer these accounts at all. Plus it's not exactly difficult or time consuming to meet the requirements.

Thank you for your time and effort it explain.

I don't buy this reason. Having all most guaranteed monthly payments on a large scale would certainly be a way to capitalise a bank, so they can add it to the regulatory requirements to have a certain percentage cash against Loans? It would also help the stress testing results?

Offers of other services is nonexistent with Santander with how I use it.

takman

TickersPlaysPop wrote: »

Thank you for your time and effort it explain.

I don't buy this reason. Having all most guaranteed monthly payments on a large scale would certainly be a way to capitalise a bank, so they can add it to the regulatory requirements to have a certain percentage cash against Loans? It would also help the stress testing results?

Offers of other services is nonexistent with Santander with how I use it.

The banks wouldn't be spending hundreds of pounds per customer just to get them to pay in a set amount each month. The primary reason is definitely to attract and keep customers so they make money when they are the first/only bank they consider when looking for financial products.

The banks have always gotten guaranteed pay ins from most customers because the majority of wages and benefits are paid directly into their account. So they wouldn't suddenly start rewarding customers for paying in monthly amounts when that is something they have always done without a reward.
But what has changed recently is that customers are much more likely to switch backs so the banks have to give customers reasons to stay with them. So that's what the high interest accounts and monthly pay ins are all about.

bigadaj

TickersPlaysPop wrote: »

Many thanks for your reply... to correct you...

Icesave at the time was covered by the protection at the time known as the "national deposit guarantee scheme". I never would have put the money offshore if there was no gurantee I'd get it back. The scheme was very simlar to the one in existance now, it was flawed and slow, and I would be very surprised if the FSCS could cope and honor the time frames if there was a large scale event.

Kindest regards :-)

Yes, far safer to keep your money with tried and tested British names like lloyds banking group and rbs; oh no sorry, they've already gone bust once and been bailed out by the taxpayer.

TickersPlaysPop

takman wrote: »

The banks wouldn't be spending hundreds of pounds per customer just to get them to pay in a set amount each month. The primary reason is definitely to attract and keep customers so they make money when they are the first/only bank they consider when looking for financial products.

The banks have always gotten guaranteed pay ins from most customers because the majority of wages and benefits are paid directly into their account. So they wouldn't suddenly start rewarding customers for paying in monthly amounts when that is something they have always done without a reward.
But what has changed recently is that customers are much more likely to switch backs so the banks have to give customers reasons to stay with them. So that's what the high interest accounts and monthly pay ins are all about.

Does it make more sense that the 'pay in' requirements are to make sure people don't milk the system to collect all available rewards and open several accounts across the banks at one time?

Also, the sort of people that switch current accounts would most likely shop around for most things... so why would they take a credit card or loan out with the same bank that holds their current account without shopping around?

Things have changed since 2008... banks now need to show they have liquidity and cash in the bank against the loans + smoke and mirror institutional financial products they have in play. This is what the stress testing is all about... if they have a lot more current accounts all paying in 1000's every month would it not shows as 'cash in their bank' and make them look more secure in a stress test?

Your points don't make sense to me sorry.

bigadaj

TickersPlaysPop wrote: »

Does it make more sense that the 'pay in' requirements are to make sure people don't milk the system to collect all available rewards and open several accounts across the banks at one time?

Also, the sort of people that switch current accounts would most likely shop around for most things... so why would they take a credit card or loan out with the same bank that holds their current account without shopping around?

Things have changed since 2008... banks now need to show they have liquidity and cash in the bank against the loans + smoke and mirror institutional financial products they have in play. This is what the stress testing is all about... if they have a lot more current accounts all paying in 1000's every month would it not shows as 'cash in their bank' and make them look more secure in a stress test?

Your points don't make sense to me sorry.

Don't think you understand the logic, though to be be fair we are talking about banks and what they think logical many may disagree with.

Not sure what you mean with regard to the pay in requirements, there are restrictions on number of 'reward' accounts with most banks but that doesn't stop you opening accounts with many different banks.

It may be that those switching accounts are more savvy than average, and the cross selling may or may not work, but this is what the banks marketing department believes. A useful by product is that it gives the impression that banks are competing, which is useful to them with regard to the media and regulator.

Banks stress tests are mainly targeted at their balance sheets, which is why they have had to boost reserves and perform rights issues etc

Why would you pay 3-5% on current accounts, or associated regular savers, when you could top the Best Buy tables for savings accounts paying not much more than 1%?

Oh and the banks aren't generally paying many hundreds of pounds per customer, one off payments of around £100-£200 are possible but are typically one offs for many years or even for life (first direct for example).

Best combination of rate and sum now is probably 3% on £5k with bank of Scotland, so assuming maximum amounts this costs them a grand total of £150 per year.

These forums aren't representative of the wider population, and that needs to be appreciated.

takman

TickersPlaysPop wrote: »

Does it make more sense that the 'pay in' requirements are to make sure people don't milk the system to collect all available rewards and open several accounts across the banks at one time?

Also, the sort of people that switch current accounts would most likely shop around for most things... so why would they take a credit card or loan out with the same bank that holds their current account without shopping around?

Things have changed since 2008... banks now need to show they have liquidity and cash in the bank against the loans + smoke and mirror institutional financial products they have in play. This is what the stress testing is all about... if they have a lot more current accounts all paying in 1000's every month would it not shows as 'cash in their bank' and make them look more secure in a stress test?

Your points don't make sense to me sorry.

If they simply wanted "cash in their bank" then why would they limit the amount they pay interest on to relatively small amounts of money?. If they wanted lots of cash in their bank they would simply offer a savings accounts at 3%+ with no limit and almost everyone would put their savings into it.

The fact that they limit the amounts that they pay interest on proves that they are aiming to get as many customers as possible.

TickersPlaysPop

There are a few things here that seem to make more sense to me together with the fact that retail banking is probably very small compared to the institutional side of things.