Lloyds, Halifax and Bank of Scotland to charge up to 49.9% interest on overdrafts from April - MSE

Consumerist

I can sense the fear in this thread that "free" banking is under threat.

Like slavery, "free" banking will eventually come to an end but it will just take time for the greedy bankers and their customers to understand they are living off the misfortunes of others.

For the record, I enjoy "free" banking but that doesn't mean it's morally correct.

abz88

Consumerist wrote: »

I can sense the fear in this thread that "free" banking is under threat.

Like slavery, "free" banking will eventually come to an end but it will just take time for the greedy bankers and their customers to understand they are living off the misfortunes of others.

For the record, I enjoy "free" banking but that doesn't mean it's morally correct.

Slavery is very much alive. Just because its illegal in this country and you can't see it, doesn't mean it's not happening.

Why would free banking end if there are mutual benefits to both the banks and the majority of its customers?

Albertis57

I have an agreed overdraft with Lloyds of 8k. I've been up to it most of last year but not over the limit. Charges were over 4.5k for the year which is crippling me getting out of debt.

eskbanker

Albertis57 wrote: »

I have an agreed overdraft with Lloyds of 8k. I've been up to it most of last year but not over the limit. Charges were over 4.5k for the year which is crippling me getting out of debt.

Borrowing such a large amount via an overdraft is always going to be prohibitively expensive, but yes, doing so from Lloyds is more so than most.

While the new changes will reduce the costs of servicing this, are you able to secure any better lending facilities to help reduce them further and ultimately pay it off, such as loans, credit cards, etc? https://www.moneysavingexpert.com/banking/cut-overdraft-costs/

If not, then probably worth completing a Statement Of Affairs and posting it on the debt-free wannabe board for other ideas about how to address this debt.

JuicyJesus

Socajam wrote: »

If you and others like you want to live on other people's money for free, it's not going to happen.

Not sure what I said that equates to that but go off king.

abz88 wrote: »

Having an obligation to help someone in debt crisis is not the same as an obligation to give everyone free or cheap overdrafts.

Or that.

If you look up at my first post in this thread (actually the first reply) my point was that this sort of rate increase was easily foreseeable and indeed inevitable as all other revenue sources for current accounts are being cut off, and that maybe people should have thought about that when they decided to start screaming about literally any way that a bank charges for anything being a crime against humanity.

That does not mean that banks do not have a duty under regulation to help people in hardcore debt, and not by purely keeping things as they are now either or by just giving them money or whatever. And indeed, they likely will do, not least because - again - people being in debt for longer is a reasonably foreseeable consequence of this change.

Ultimately the free banking settlement is broken. Either everyone pays for private companies to pay the services they individually use, or we treat banking as a public utility and remove the profit element entirely. The previous way (a small portion of people pay for the services of everyone) is being MSE'd out of existence.

abz88

JuicyJesus wrote: »

Not sure what I said that equates to that but go off king.



Or that.

If you look up at my first post in this thread (actually the first reply) my point was that this sort of rate increase was easily foreseeable and indeed inevitable as all other revenue sources for current accounts are being cut off, and that maybe people should have thought about that when they decided to start screaming about literally any way that a bank charges for anything being a crime against humanity.

That does not mean that banks do not have a duty under regulation to help people in hardcore debt, and not by purely keeping things as they are now either or by just giving them money or whatever. And indeed, they likely will do, not least because - again - people being in debt for longer is a reasonably foreseeable consequence of this change.

Ultimately the free banking settlement is broken. Either everyone pays for private companies to pay the services they individually use, or we treat banking as a public utility and remove the profit element entirely. The previous way (a small portion of people pay for the services of everyone) is being MSE'd out of existence.

That's not how business's operate though. It is very common for companies (including banks) to run certain parts of their company as a loss leader. Offering customers a small amount a month in rewards or % on money in an account is peanuts if customers take up their "special offers" of lower interest loans for customers, take out or move their mortgage/insurance to them, take out a credit card with them etc. Its the same reason benefits are better on Premium accounts, banks view them as better customers for their other products not better customers for their current accounts.

JuicyJesus

abz88 wrote: »

That's not how business's operate though. It is very common for companies (including banks) to run certain parts of their company as a loss leader. Offering customers a small amount a month in rewards or % on money in an account is peanuts if customers take up their "special offers" of lower interest loans for customers, take out or move their mortgage/insurance to them, take out a credit card with them etc.

The problem with this is that customers generally now don't go to their banks to get new deals, or do so a lot less than they did before; they will go to a comparison site or eligibility calculator thingy like MSE's to see what they can get. They also have fewer people using branches, so fewer opportunities to cross-sell.

Add to this that there's less for current accounts to be a loss leader for and you can see the problem. There's no point being a loss leader where there's no prospect of a cross-sell or further revenue, that's just offering a product at a loss.

This isn't like an Xbox, where Microsoft sell the console at a loss because they know they'll get money back from game sales and subscriptions, or supermarkets selling milk or beans at a loss because they can make it up on other things. This is high street banks giving away services at a loss with only a fraction giving any significant money back at all.

Consumerist

Albertis57 wrote: »

I have an agreed overdraft with Lloyds of 8k. I've been up to it most of last year but not over the limit. Charges were over 4.5k for the year which is crippling me getting out of debt.

Hi Albertis57 and welcome to the forum. Thanks for sharing.

I would also suggest you visit the <Debt-free Wannabe> forum as suggested by eskbanker. You might do yourself a big favour in the long run.

abz88

JuicyJesus wrote: »

The problem with this is that customers generally now don't go to their banks to get new deals, or do so a lot less than they did before; they will go to a comparison site or eligibility calculator thingy like MSE's to see what they can get. They also have fewer people using branches, so fewer opportunities to cross-sell.

Add to this that there's less for current accounts to be a loss leader for and you can see the problem. There's no point being a loss leader where there's no prospect of a cross-sell or further revenue, that's just offering a product at a loss.

This isn't like an Xbox, where Microsoft sell the console at a loss because they know they'll get money back from game sales and subscriptions, or supermarkets selling milk or beans at a loss because they can make it up on other things. This is high street banks giving away services at a loss with only a fraction giving any significant money back at all.

That assumes that a) the majority of people use comparison sites and that b) the comparison site shows them the best deals and not the best sponsored deals.

On a), I don't think the majority of people use comparison sites or sites like MSE. This article estimates that it's 11 million (compared to a UK population of around 66 millIion so less than 20%) https://www.telegraph.co.uk/business/risk-insights/price-comparison-sites/

On b), its widely acknowledged that a lot of comparison sites use sponsored listings, so a bank with a decent current account that sponsors listings on a comparison site will likely have a high rate of cross-selling (If you go on a comparison site, one of the "top" deals is with your current bank a lot of people with think, "that's handy, I can just go with X and manage it all in one place!"

born_again

What I find most annoying is that the FCA have instigated these changes on the grounds that they want to make it easier for people to compare how much a overdraft will cost you.

How the hell are you supposed to do that will all the different rates being charged, as well as like this lot. You can have a different o/d rate....

I think that the FCA needs a kick up the backside. They did have the power to set a cap on the rates allowed. But have left it to the banks to set their own rates (fair enough) \but they really should have set say a 25% max cap.
Which I'm guessing they will do in a year or so....