Fixed daily and monthly overdraft fees to be banned - MSE News

Stuart_W

Paul_Herring wrote: »

For most parts of the country, that's already happening. For those still using cash, that is.

The 52,000 free to use cash machines at the start of the year has only gone down to around 50,000, so not quite most parts of the country (yet)

But I mean the BANK actually charging 25p. That would be on top of anything the cash machine operator chooses to charge. Banks have to pay around 25p at present to the cash machine provider at the moment.

If bank charges are supposed to reflect actual costs to the bank - which this ruling implies - they could quite justifiably start charging for cash withdrawals.

If the income stream from overdrafts is significantly cut down, they will look for all other options - and speeding up the demise of cash will be something the banks wouldn't mind.

Paul_Herring

The 52,000 free to use cash machines at the start of the year has only gone down to around 50,000, so not quite most parts of the country (yet)

You presume that most of those 50,000 are evenly spread around the country, rather than concentrated in spots where they're in competition with other free cashpoints nearby.

But I mean the BANK actually charging 25p. That would be on top of anything the cash machine operator chooses to charge. Banks have to pay around 25p at present to the cash machine provider at the moment.

All that's going to do is change behaviour, and not necessarily in the presumably intended manner.

If bank charges are supposed to reflect actual costs to the bank - which this ruling implies - they could quite justifiably start charging for cash withdrawals.

Which starts of as "as much as they currently pay" and will increase over and above the actual cost.

Then it will move to a 'per any-transaction' such as standing orders, direct debits and direct payments. Oh - and every time you swipe your card for your £5 latte or Greggs Artisanal Vegan Sausage Roll (buy 3, get one half-price.)

And who will be the losers here? Those who use their bank accounts more, and for whom those costs will be a greater proportion of their income.

We're back to punishing the poor again.

If the income stream from overdrafts is significantly cut down, they will look for all other options - and speeding up the demise of cash will be something the banks wouldn't mind.

Only if transactions in raw cash is the only thing they'll end up charging for.

It won't be.

Takmon

Stuart_W wrote: »

So overdraft fees will finally be scrapped.

Never personally understood why borrowing £100 from my bank using my debit card could cost me £20 plus interest, but using my credit card to withdraw the same amount would cost £2 plus interest. Always seemed a bit mad to me.

It's because there is a different risk to the bank for the different products. If someone uses a credit card they are always actively choosing to borrow the money, they will then receive a statement and there is an agreed minimum payment that needs to be repaid every month to reduce the debt.

If someone is using an overdraft they have no money left in that account and need more (yes they may have other accounts). But more often than not they have no other option if they are happy to pay such high fees to borrow the money. So they are desperate, in financial difficulty and with no formal repayment plan for overdrafts the bank are less likely to get the money repaid.

Ergates

Paul_Herring wrote: »

Which starts of as "as much as they currently pay" and will increase over and above the actual cost.

Then it will move to a 'per any-transaction' such as standing orders, direct debits and direct payments. Oh - and every time you swipe your card for your £5 latte or Greggs Artisanal Vegan Sausage Roll (buy 3, get one half-price.)

And who will be the losers here? Those who use their bank accounts more, and for whom those costs will be a greater proportion of their income.

We're back to punishing the poor again.

Fundamentally: Running a bank costs money, a lot of money. Everything you do with a bank costs them money: Cash machines cost money to operate; branches cost money; money transfer systems cost money to run and maintain; running the websites and apps cost money; and so on and so forth. That money has to come from somewhere. As the FCA clamps down on "old" revenue streams, the banks will have to find new ones to take their place.

We've gotten used to the concept of (nominally) free banking in the UK - because the costs were covered by largely avoidable fees and charges (avoidable if you're in a good financial situation that is). This means that the "free banking" actually meant "paid for by someone else", and that someone else was usually someone less well off than you - which isn't entirely fair when you think about it.

The days of free banking are probably numbered, and maybe that's not such a bad thing if it results in a fairer system that doesn't shift most of the costs onto the people least able to afford them.

Ergates

Paul_Herring wrote: »

https://continentaltelegraph.com/economy/complete-nonsense-from-shelter-britain-does-not-have-320000-homeless/

I missed this originally: Typical nonsense from a right wing gammon who doesn't understand what homelessness is (no, it's not the same as sleeping rough). Also irrelevant as I was using it as an indicator of poverty - and I think living in temporary accomodation provided by the state counts as being in poverty).

robertodare

Paul_Herring wrote: »

Because the companies putting the transactions onto the card tend not to tell the card company immediately.

Paul,
your statement is incorrect.

If you use a debit card from a modern bank (Revolut, Wirex and even BarclayCard) you actually get an SMS immediately telling you of the purchase you just made, including when you spend at gas stations.

So, there is not need for any new hardware or burden on the corner shop .. that's exactly my point .. the excuse that they are not notified of the expense, is just that .. an excuse.

And from September, when SCA (Strong Customer Authentication - part of PSD2) kicks in, they will have to ask you to confirm each transaction anyway, so are they going to be able again to say that they don't know the amount they are authorising?

I feel my case stands and they can't charge unfair fees only because their old agreement says so.

As to my overburden card, I hardly ever use cash these days and have a joint account, so it is actually 2 people using the card and the credit limit is set specifically to avoid spending too much .. and particularly because I do clear my balance each month, it does annoy me having to pay a fee for the privilege (NOT!).

I am in the process of changing cards anyway, but I know they charged me unfair fees for a long time and I am sure other people that can't change cards because they might be in financial difficulties are probably going to continue get overcharged.

robertodare

Ergates wrote: »

They "should"? Why? I mean, yes it's helpful when they do, but are they obliged to?

If they offer me the service to notify me when I am about to go over the credit limit, then yes, I expect them to tell me accurately.
Otherwise don't offer me the service if they can't fulfil it and they charge me a fee anyway for their inability. There is no disclaimer either when I activate the alert.

Ergates wrote: »

Because debit cards and credit cards operate in a *totally* different way.
Because most banks don't operate their own credit card schemes - they use either Mastercard or Visa - whereas they generally do operate their own current accounts (to which debit cards are linked)
Because .... Because .. ....

In a way, I do not care why they do not do it.. and this is my point, the technology is there to do it and for that reason it makes it equal to an unfair fee, like Overdraft fees .. I think it is an unfair practice on the part of some card providers.

More than a technical answer, I am actually after a legal opinion in case someone looked into this already.

Ergates

robertodare wrote: »

If you use a debit card from a modern bank (Revolut, Wirex and even BarclayCard) you actually get an SMS immediately telling you of the purchase you just made, including when you spend at gas stations.

So, there is not need for any new hardware or burden on the corner shop .. that's exactly my point .. the excuse that they are not notified of the expense, is just that .. an excuse.

Those are debit cards. You were talking about credit cards. Debit cards operate in a different way to credit cards.

robertodare wrote: »

And from September, when SCA (Strong Customer Authentication - part of PSD2) kicks in, they will have to ask you to confirm each transaction anyway, so are they going to be able again to say that they don't know the amount they are authorising?

No, they won't. Firstly, there are a number of exemptions to SCA - for instance transactions below a certain amount won't need to be stepped up. Secondly, chip and pin transactions are already considered 2FA so won't need to be stepped up further anyway. The changes coming in with PSD2 will mainly affect online transactions.

robertodare wrote: »

In a way, I do not care why they do not do it.. and this is my point, the technology is there to do it and for that reason it makes it equal to an unfair fee

So, basically, your point is that you don't understand how credit cards work and therefore it must be easy and therefore the companies must be doing it on purpose. You're arguing from a position of ignorance, you don't know what you're talking about.

Uxb1

Ergates wrote: »

The days of free banking are probably numbered, and maybe that's not such a bad thing if it results in a fairer system that doesn't shift most of the costs onto the people least able to afford them.

I suspect a future bank charging structure will manifest itself as you will pay bank charges per transaction "unless you keep £1000 average balance in your account during the month" sort of thing.

Paul_Herring

Interesting alternative view on how the banks make their money, and it ain't (entirely, or even mainly) on bilking people on overdrafts...

(£): https://www.thetimes.co.uk/past-six-days/2019-06-23/money/savers-rates-melt-away-as-lenders-woo-homebuyers-vwpzsfmkc

Banks and building societies are hacking back savings deals for loyal customers so that they can offer more competitive mortgages. TSB will cut rates by half on five accounts that are no longer available to new customers. They include Advantage Saver and Flexible Savings, which will see rates plunge from 0.3% to 0.15% on September 10.

TSB said the move would help it to offer cheaper mortgages, an area where competition is fierce.

The latest Bank of England data shows about £169bn is held in accounts — typically current accounts — that pay no interest. There is also about £750bn in easy access savings, paying an average of 0.5%, bringing the total held in low-paying accounts to almost £1 trillion.

[...]

Meanwhile, an Isa that was introduced exclusively for loyal savers with Coventry Building Society now pays less interest than the mutual hands to its new customers. Coventry offered the Isa Reward account to existing savings customers between April 2013 and September 2014, initially at its top rate of 2.5%. However, despite being pitched as a reward for loyalty, the rate has sunk to 1.4%, while Coventry’s Easy Access Online 2 Isa pays 1.5%.

There is worse to come for the 33,000 people who hold the mutual’s MoneyManager savings accounts: from September, their debit cards will be withdrawn, as will their overdraft facilities. Coventry said the MoneyManager accounts, which closed to new customers four years ago, were “costly and complex” to operate.

The low rates on savings are a lucrative source of profit for the industry, as it provides banks and building societies with a cheap, and often reliable, source of funds upon which they can lend money. This is known as the funding benefit.

A study by the Financial Conduct Authority (FCA) found that the funding benefit, rather than overdrafts, was the largest source of revenue for banks.

The report, which focused on current accounts, showed that almost half (48%) of bank revenue came from the funding benefit. This compared with 32% for arranged and unarranged overdrafts.