Why a bank charges win doesn’t mean the end of ‘free banking’ blog discussion

melancholly

Smasher wrote: »

So this confirms that your employers were indeed lying to the courts when they said that the charges were to cover their admin costs?

i think this is the point that makes the case for me - yes charges are rubbish, yes some people should manage their money better but we're not all perfect and sometimes things just happen to you that makes counting receipts in bed every night to check every last penny in your account not all that realistic!

if these are charges to prop up the rest of the banks' incomes, then they have to admit it. if they're a penalty then they have to be fair. i don't think they should be scrapped completely, but the level is ridiculous at the moment.

northern rock aside, banks are still making healthy profits - and even if they aren't as big this coming year, a professional banker should know to save money from the good times in case of bad times to come.! is reducing bank charges going to completely remove their profits?! with RBS reporting £9.2billion last year, i very much doubt it!

a11waysindebt

Lets say the bank charges are reduced,but monthly charges are introduced for payments going in and out like my business account.

Would the majority of customers prefer this method.

Smasher

Only those who have never been a victim of penalty charges I suspect. Sure, I'd prefer it if someone else paid for my shopping too!
Perhaps I'll ask the council to make the guy who pays his rent late pay my rent while I'm at it.. Sounds like a fair system doesn't it?

mark_casey

sirsquack wrote: »

I work for one of the major high street banks and I am so sick and tired of people moaning about charges. As far as I know we are not one of the worst offenders either.
To say that banks will not start charging if they loose the case in my opinion is very unlikely, and I also believe in the long run the customer will loose out because of this. Last year if we had charged no fees for going overdrawn without authorization but everyone had been on the fee paying account we already offer we would have made a huge loss (i forget the exact figure). This to me only suggests that if overdraft fees do get removed, a standard fee will get introduced to EVERY account, perhaps even a 'pay as you go' system where by people doing things banks don't generally like, e.g. dealing in cash, using branch services etc (i.e the things that cost them most money) will get charged per transaction. I don't want to give away who i work for but there is already something bordering on this that has sneaked into the system.
To make everyone pay for their banking to me seems like an unfair punishment to those who do actually manage their finances and not spend what they don't have. In this day and age it is far to easy for people to spend what they cannot afford and then blame it on the creditor. I cannot understand though why people cannot just accept what their income is and if they can't afford some of life's luxuries on it then deal with it. There are lots of things I'd love to go out and buy but can't afford. Do i just stick it on credit willy nilly, do I hell. It makes my stomach churn when i see these debt shows on tv with people my age (20s) in debts of £20K + all unsecured and in the majority of cases purely because they saw, they wanted, they stuck it on credit.
To blame the bank for letting them go over to me is ludicrous, if the shoe was on the other foot, you were stranded somewhere in the middle of no where and desperately needed cash but were bang on your limit and and could not get any you would be pretty !!!!ed off. People just need to learn to budget and to take better care of their money. You cannot blame banks for you spending money you do not have to spend. With internet and telephone banking there should be no excuse for not knowing what is in your account and how much you have to spend. I try to check my account at least a couple of times a week and i keep a spreadsheet of what I have going out so even if something hasn't physically left my account yet I know exactly where i'll stand when it does. This is hardly a great effort either, a couple of minutes in a evening to check on the days spending and type it in a spreadsheet isn't exactly demanding.
I don't want to say its easy cos i know it always isn't, nobody is perfect and there is always those unplanned bills and expenses that pop up from time to time. Believe me i have had times where i have been really struggling waiting for the next pay cheque but unauthorized borrowing will only make matters worse, there is ALWAYS a better answer, but sadly many people are to lazy to look for it. If you keep a careful eye on your finances you will have fair warning if something is looking a bit worrying on the horizon and in many cases a quick call to the bank and a temporary overdraft limit increase can prevent unnecessary charges.
In my experience those customers who keep getting excessively charged have no one to blame but themselves. I have never seen a case where someone has just slipped over and immediately had a charge slapped on. It is always those who keep on doing it. If people are struggling they need to speak to the bank before it gets to that stage, as much as people think banks don't care and just want to take your money at the end of the day if you continue to be in serious debt it will eventually get written off as 'bad debt' go to a collection agency and in all likelihood the bank looses money and a customer. Sure banks are nobodies best friend, at the end of the day they are there to make money for their share holders but they cannot do that without loyal customers and in most cases will work hard to help people as long as they are willing to help themselves.

this is such a load of rubbish . For 1 Why is someone who suddenly finds they are out of work and unable to work ( an accident for example) be punished by the faceless bank , you can try all you like to get the overdraft but they only say no , then what are you supposed to do, as allways its the lower paid that are punished, and if your bank would loose money from not charging people who go in the red then you have a very badly managed bank that will go the way of northern rock very soon and i would be looking at naming and shaming them because the shareholders and all who have deposits with them really need to know this.

Tim_L

Ok, grumpy old man mode engaged.

Why is it that no-one now seems to know that you do not 'loose', you 'lose'? 'Loose' is an adjective, not a verb, at least in this context.

To blame the bank for letting them go over to me is ludicrous, if the shoe was on the other foot, you were stranded somewhere in the middle of no where and desperately needed cash but were bang on your limit and and could not get any you would be pretty !!!!ed off. People just need to learn to budget and to take better care of their money. You cannot blame banks for you spending money you do not have to spend. With internet and telephone banking there should be no excuse for not knowing what is in your account

Well this cuts both ways, doesn't it. I mean let's leave aside for the moment the fact that the amounts shown online and in cashpoints don't reflect the actual amounts reserved against accounts just from card transactions, they're usually a figure for yesterday. And let's ignore the fact that odd things can and do happen, cheques can be forgotten, and so on.

By the same token Banks know precisely how much cash is in an account at the point a transaction is made. But instead of stopping at the limit of available funds, they set a limit about £50 below that, and the only reason this is done is so they can charge if a mistake is made.

I have loads of bank accounts, and I use them very intensively, being a professional gambler - I don't have time usually when hitting an opportunity to check balances so I rely on memory mostly. For every single one of them I have specifically requested no overdraft. I have NEVER EVEN BEEN ASKED if I want the "service" of unauthorised overdrafts, all I want is the transaction to be rejected.

Even with normal spending, there are very few occasions where the rejection of a transaction would cost me more than the bank charge - I'd just change the transaction method to a credit card or something. It's not a service I actually want, it is horrendously poor value.

It's not the first time a bank employee has come on here defending charges, almost as if there has been some sort of mass indoctrination. The charges are indefensible by any standards. As penalties they would be unlawful, are excessive, and do not reflect costs to the banks. As "service" charges, they are unwanted, imposed without agreement, and are poor value for the service offered. As a profit stream, which is what the charges actually are, it's lazy and greedy. They hit hardest those in marginal difficulties and cause serious difficulties.

And they were not invented so that the masses could have free banking, free banking was (we were told) paid for by branch closures. We still have free banking, banks would charge if they felt they could get away with it (hence the rise in 'premium' charged services), and there is enough competition in the sector to maintain this, unless the banks are allowed to pull off their next trick, which is to persuade people that current accounts are so desperately unprofitable that charges are inevitable, and it's all the fault of the financial numpties buying plasma tvs without checking their balances. This is a stereotype that has precious little basis in reality. It's scapegoating.

Current accounts are lots of things. One of them is that they are a cross selling starting point, and this is the principal reason why they can be offered without making money directly. Banks however have found it difficult to cope with the very financial literacy that people here are advocating as a solution to the unauthorised overdraft "problem", because it leads people to reject poor value cross sold products in favour of market leading ones. People are increasingly financially sophisticated in fact.

And here we have the nub of the issue really. Far from wanting to provide deterrents and inducements to customer to manage their finances better, which is what banks tell their employees, the banks WANT financial illiterates whom they can charge as they wish and sell crap products to.

And if banks are lying to their employees, what hope do the rest of have?

rog2

sirsquack wrote: »

I work for one of the major high street banks and I am so sick and tired of people moaning about charges. As far as I know we are not one of the worst offenders either.

So you admit, at least, to BEING an OFFENDER

I cannot understand though why people cannot just accept what their income is and if they can't afford some of life's luxuries on it then deal with it.

Thank you - I didn't realise that it's only 'life's luxuries' that cause debt, and please forgive me for thinking that even Bank Employees found it difficult to 'just' accept' what there income is - I have obviously been misinformed and the well publicised threats of industrial action, by bank staff, are of course non-existant.

To blame the bank for letting them go over to me is ludicrous, if the shoe was on the other foot, you were stranded somewhere in the middle of no where and desperately needed cash but were bang on your limit and and could not get any you would be pretty !!!!ed off.

Like being stuck in London, after having had my debit card refused at the train station, because of a charge that had been taken out of my account that morning, which caused me to be over my limit, and being told, by a call centre employee that I must make 'other arrangements'. Please forgive me for giving that poor man the impression that I was, indeed, '!!!!ed off.'

People just need to learn to budget and to take better care of their money.

So THAT'S the secret - Thank You.

I try to check my account at least a couple of times a week and i keep a spreadsheet of what I have going out so even if something hasn't physically left my account yet I know exactly where i'll stand when it does.

This, as I have previously said, is not an option for everybody. You are, indeed, a lucky person to know exactly where you stand. Not necessarily the case for a young mum, who is trying to balance a part-time job, with a couple of demanding kids and a late benefit payment. But perhaps she hadn't 'budgeted' for that - she CERTAINLY will not have 'budgeted' for the whacking great charge that someone else's inefficiency is going to 'net' her.

In my experience those customers who keep getting excessively charged have no one to blame but themselves.

Is there, perhaps, someone with a bit more experience in your Bank? Someone, perhaps, who is not quite so generous when it comes to apportioning 'blame'.

If people are struggling they need to speak to the bank before it gets to that stage.

It would be nice to have a 'two-way' discussion.

as much as people think banks don't care and just want to take your money at the end of the day if you continue to be in serious debt it will eventually get written off as 'bad debt' go to a collection agency and in all likelihood the bank looses money and a customer.

So would I be wrong in my assumption that Banks pass 'debt' or the 'risk of debt' to the scavenging culture of 'debt-collection' at the first sign of problems? Interesting :think: :think:

Sure banks are nobodies best friend, at the end of the day they are there to make money for their share holders but they cannot do that without loyal customers and in most cases will work hard to help people as long as they are willing to help themselves.

I see that you make no mention of the word 'Ethical'.

Going back to the question of whether or not a win for those claiming that Bank Charges are illegal, should herald the end of free banking, and taking advantage of your, obviously superior mathematical ability, please could you answer the following questions:

1. If I borrow £20,000 over ten years, secured against my house, from your bank, even assuming that I am, which I am not, a good credit risk., what is the total amount that I would pay the Bank?

2. If I deposited £20,000 into a high interest basic tax paid, savings account (one that is freely available to all of your customers) and did not touch it for ten years, what is the total amount that would be in that account, available to me, after 10 years?


I would appreciate an answer as I am trying to understand how the Banks would manage to 'survive' without being able to impose punitive charges.

Thank You.

Phoenixx73

Nice rebuttal. I would have had a crack myself but you have done what i would have tried (and most likely failed to do) and more.

I'm sorry but people like that on this site do more damage to the banking industry than they aliviate. It's probably a good job they dont let their counter staff and branch managers argue in court against the OFT otherwise the case would have been won 5 minutes after proceedings began.

Also, would our Employee of the month banker care to explain to me how it is MY FAULT that my bank chooses to pay my direct debits out on Mondays BEFORE crediting my pay into my account JUST so that they can bounce said debits and charge me for the privelage? out of all of the charges I am reclaiming, that is what constitutes the MAJORITY of them.

But it is my own stupid fault. I had yet to discover MSE and naively assumed that my bank would do it's utmost to assure that my account was run in a logical manner (i.e. money in first, money out second). Would our friendly banker say something along the lines of "Well it is entirely your fault as you should have set up the DD for several days later". Yeah, great.. give me more things to have to keep track of. More things to keep track of means more margin for error and subsequently more charges

jamesd

sirsquack, if I bank with your employer and they introduce an unavoidable charge for a current account, I will stop being their customer. I already have two bank accounts, one for salary and major items and another for bills so it's no problem at all to get the rest of my finances switched away from whichever one introduces the charges.

Other consumers can do the same thing, setting up a bill payment account now so that they will have some history with their new bank if full switching becomes useful.

Whether the revenue loss from sacrificed cross-selling opportunities is enough of a disincentive for charge introduction is hard to say but it was amusing that the head of ING recently complained that UK consumers are too inclined to be rate tarts and switch to the best deal. It'll be interesting to see if UK banks encourage similar tarting in the current account business via charge introductions.

One thing I am sure of: some competitor will exploit the market opportunity from charge introductions if it's offered. Certainly some internet-only places with low cost base can be expected to react with glee.

exil

Without charges, the majority of personal accounts would lose money for the banks. I think I remember seeing a figure of 75%. The small amounts of interest earned do not cover the admin costs/overheads.Until a few years ago the losses were covered by making small charges per transaction to everyone (as is done for business accounts). Then someone hit on the wheeze of free banking when in credit. I've benefitted from this over the years myself. As is now obvious, my free banking is someone else's bank charges. Also, until a few years ago banks would just refuse to honour cheques (remember them?) if you went over your o/d limit. Now they tend to let transactions go through, and charge you for them.

I agree that the banks are in the wrong in this case and are likely to lose. However I can't agree with Martin that this will have no effect on free banking. We're now likely to go to a system where charges reflect the actual costs of managing an account (plus a profit element). So by definition, free banking will no longer exist, unless you keep a large amount in your account. Banks are also likely to recoup their losses by increasing interest rates for o/ds.

Tim_L

We've had free banking for well over 20 years Exil. I don't recall ever paying charges per transaction for personal banking, though I do recall a monthly fee. Charge free banking was an innovation designed to take market share at a time when branches were being closed and overheads reduced.

It's highly debatable whether current accounts are unprofitable taken as a whole. On some direct measures, and assuming all bank infrastructure is consumed by current accounts and none of the cross-sold products (which is obvious nonsense), maybe you could get a figure that made them look unprofitable.

If they weren't profitable though, why would anyone in their right mind offer them, and why would is there so much competition to offer them?

There has been a massive spin campaign by the banks led by that dreadful spokeswoman to persuade people that charges for current accounts are inevitable, but she has lied through her teeth before (claiming that pentalty charges were needed for credit searches on every transgression of an overdraft limit, which is obvious nonsense). The idea is to persuade people that charges are inevitable. Which they're not, but sadly the campaign is working rather well.

The fact of the matter is that banks want these charges and have wanted them for ages. Because they are a further easy profit stream in a market in which margins are tight and growth is constrained. It has been impossible for them to introduce them generally, because of the competition in the sector and the fear of a backlash. They have tried the idea of 'premium' accounts which are charged with some success, but they need something else to move the idea forward more generally.

So what better excuse than the new breed of spendthrift numpties, flagrantly trying to take advantage of all of the thrifty majority by requesting repayment of payments due under terms and conditions? It is classic scapegoating, and opportunistic at that.

Banks do not decide that they have had enough profit for one year and so won't look elsewhere. They will take what profit they can find where they can find it, and all that stops them are competitive pressures and public reaction. If we allow them to emplant the idea that current account charges are inevitable because penalties (a relatively new concept, at least on the scale they are being applied now) are potentially being removed, we just hand them our money on a plate. These are two completely separate issues.