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

robertodare

Ergates wrote: »

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

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.

Actually .. I do understand how Credit Cards work, you are not reading carefully what I am saying .. I will summarise it .. "technically .. today .. if they really wanted to .. a credit card company knows right away when I use my card and for how much" ..

Let me use an example .. a merchant, as part of an order flow, can request a "pre-auth" on my card and lock a certain amount .. let's say £ 1,000.. this is immediate because they get an Auth number .. we agree ?
The consequence of this, is that I can not use that £ 1,000 from my credit limit, even if technically I have not spent it yet.. and it is not on my statement .. so the card company
1. knows I have tried to spend £ 1,000 ..
2. they deduct £ 1,000 from my available credit
So, in this case, they do track accurately my spending limit ..
But they do not do this all the times, because not all merchants use that facility .. but why not? (and I know about the problems if the trx is cancelled and the lock is still there.. with today's technology this could be managed much better, and some CC companies do)

So .. back to my point .. and I am not arguing that they could do this without doing some changes to their software (my previous point to the other gentleman was relate to the fact there is no need for new hardware or burden on the POS), but the CC companies, could very well get their thinking caps on, make some changes to their software and get to the point where they can track precisely the spent and provide accurate spending information ..
My point is that this is possible today and it has been possible for a while .. most CC companies however, have no incentive do do anything about it .. at least for now.

As people like myself, fortunate to have financial freedom, migrate to other payment methods, they are just loosing business from the customers that use them as utilities and bring them transaction volumes and fees on the merchant side.. and instead they will end up with just the debt slaves.
I have no exposure to their P&Ls, but I doubt this scenario is their ideal scenario.

Paul_Herring

robertodare wrote: »

Actually .. I do understand how Credit Cards work, you are not reading carefully what I am saying .. I will summarise it .. "technically .. today .. if they really wanted to .. a credit card company knows right away when I use my card and for how much" ..

No. They don't. You even point out why they don't...

Let me use an example .. a merchant, as part of an order flow, can request a "pre-auth" on my card and lock a certain amount .. let's say £ 1,000.. this is immediate because they get an Auth number .. we agree ?
The consequence of this, is that I can not use that £ 1,000 from my credit limit, even if technically I have not spent it yet.. and it is not on my statement .. so the card company
1. knows I have tried to spend £ 1,000 ..
2. they deduct £ 1,000 from my available credit
So, in this case, they do track accurately my spending limit ..
But they do not do this all the times, because not all merchants use that facility .. but why not? (and I know about the problems if the trx is cancelled and the lock is still there.. with today's technology this could be managed much better, and some CC companies do)

So, we're back to requiring 3rd parties to confirm, or otherwise, whether or not the money has been spent. Issuers can have a guess, but that guess might not be correct.

The auth may not even match the eventual amount. In your example, the £1000 may be the max they'll end up charging. (Hotel for incidentals e.g.)

The amount charged may actually be on a different day.

The auth (generally for smaller amounts) may just be a confirmatory authorisation of (say) £1 like The Times did to me the other week, to make sure the card is valid for when they do need to take a (recurring in this instance) amount, with no intention of that auth amount being taken

None of this is under the card-issuer's control, which is your assertion. So we're back to the points I made in this post, which you vehemently disagreed with, yet violently agreed with me, in principle, in the post I'm quoting here.

It is the vendors who need to change their behaviour, not the card companies.

And what is 100% under someone's control is the card-holder's knowledge of (1) the card limit (2) the current balance and (3) what they know to be put onto the card. Making it the card-holder's responsibility to known what the current balance is, or should be.

IainHL

eskbanker wrote: »

And round and round we go - as I recall overdrafts used to be charged at published interest rates as standard but the 2016 CMA recommendations on capping unauthorised overdraft costs led LBG in particular to introduce the concept of fixed-fee overdrafts on the basis that customers found interest rates too confusing!

I'm glad I'm not the only one who remembers how things used to be and finds it all rather ironic that the banks are now being forced to go back to an interest charging model for overdrafts. I can recall Halifax trumpeting how the fixed daily fee was so much simpler to understand!

Consumerist

IainHL wrote: »

I'm glad I'm not the only one who remembers how things used to be and finds it all rather ironic that the banks are now being forced to go back to an interest charging model for overdrafts. I can recall Halifax trumpeting how the fixed daily fee was so much simpler to understand!

And, as if we (MSEers) didn't know already, it will become clear that overdraft rates have been and will be akin to payday-loan rates.

Ergates

IainHL wrote: »

I'm glad I'm not the only one who remembers how things used to be and finds it all rather ironic that the banks are now being forced to go back to an interest charging model for overdrafts. I can recall Halifax trumpeting how the fixed daily fee was so much simpler to understand!

They're not wrong - it was simpler to understand. It was just also more expensive.