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

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  • webwizwebwiz Forumite
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    I half agree with Martin. But banks have buildings, staff and computers etc which all cost money and the customer has to pay somehow. Banks cannot easily make excessive profits otherwise competitors will move in eg ICICI and Landsbankski. So banks are entitled to charge for their services but the current charges are unfair. At present people going overdrawn are overcharged. Any transfer from one interest paying ccount to another is unfairly penalised by a few days loss of interest. I am sure that the upshot of the current court case will be that the regulators force the banks onto tariffs where the charge is more closely related to the costs.

    The post immediately above overstates the case. If the only reason you have a bank account is because your employer will not pay you in cash you can simply draw out your wages and the bank will not charge you anything.
  • dchurch24dchurch24 Forumite
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    But drawing out your cash from a bank isn't that easy. I would have to give them notice for drawing that cash out, each and every time I did so.

    The odds of them getting it right are slim.

    Every time I have had to give notice for a large withdrawal in the past (about 4 times) the money hasn't been there, or they have had no record of me making the 'request'.
  • impecuniousimpecunious Forumite
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    Great article, Martin.

    I personally believe that there is no black and white in this arguement: as a business, the banks are entitled to make money for their services. What is objectionable, however, is the excessiveness of those charges. Of course banks have to pay overheads like any other business, but Barclay's, for instance, really does not need to make in excess of £7 Billion every year, does it?
    If I had 8 hours to chop down a tree, I'd spend 6 hours sharpening my axe
  • I have lived in the USA for a period, and now I'm in Israel; both of which charge for banking. The USA, (if I remember rightly) charged for every cheque book issued (if fact, the banks themselves don't even give cheque books; you have to buy them yourselves from a third-party supplier). However, fair's fair.

    In Israel, I pay a monthly fee, for which I receive a certain amount of transactions monthly (DDs, withdrawals, deposits, cheques written etc) plus I pay for the debit card and cheque books. If I go over the limit, I pay per transaction. Bounced cheques cost me about £4, which I suppose is reasonable, however unauthorised overdraft is free of charges (although the interest is higher) Banks have it at their discresion to pay above the AO. My bank manager usually calls me up if a cheque is likely to bounce - he tells me the situation, and asks when I plan to make a deposit. If I tell him I'll do it tomorrow, he says that he'll pay it, as long as I pay the money in ASAP. It works on trust, but if I didn't pay in straight away, he wouldn't let me again, so I do. Also, when my wife gave birth last month and I was away from home, I came home to find several messages on the Answerphone from the bank. When we contacted them, we explained we'd just had a baby, and the manager said "I thought so" (he'd obviously noticed my pregnant wife in the branch). He didn't bounce even one cheque (from several) It was nice of him.

    However, there is a law here that all banks have to follow, that if a customer bounces 10 cheques/DDs in a 6 month period, their account is shut down and they are not allowed to open another one for a year.
  • dchurch24dchurch24 Forumite
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    It sounds similar to the way banks used to work here of course.

    The problem was, banks suddenly had laws change in their favour and decided to milk it for all it was worth. The trust was lost.

    What happens if you don't have a bank account for a year?

    Are you forced to have your wages paid into a bank, or can you choose in cash?
  • impecuniousimpecunious Forumite
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    dchurch24 wrote: »
    What happens if you don't have a bank account for a year?

    Are you forced to have your wages paid into a bank, or can you choose in cash?

    Most employers will not pay in cash these days for fear of robbery of course. But there are alternatives, such as paying your wages to one of those PAYG debit cards that have sprung up.
    If I had 8 hours to chop down a tree, I'd spend 6 hours sharpening my axe
  • dchurch24 wrote: »
    It sounds similar to the way banks used to work here of course.

    The problem was, banks suddenly had laws change in their favour and decided to milk it for all it was worth. The trust was lost.

    Yes, yes. From Dad's army you see how banks used to be. Here there are no bullet proof windows etc, so you feel close to the teller. (Ironic in the country known for terrorism etc.) Even in the USA there is no glass between you and the teller; only if the UK is there.

    Even the tellers here know your name - one even knows my account number by heart, which is useful - because I don't!

    Also, if I need to do something, but don't have ID, it doesn't matter; they recognise your face.

    What happens if you don't have a bank account for a year?

    Are you forced to have your wages paid into a bank, or can you choose in cash?
    I want to tell you something - it is definatly something not to be sneezed at - if fact it is a jolly effective deterent. I have told my wife on many occasions that if it does (which it almost has) happen, we'd have to leave the country.

    Usually, wages are paid by cheque (here, like the US and most places outside the UK, a crossed cheque is not standard, nor is Account payee), thus you can just cash the cheque quite easily. Most utility bills can be paid in the post office or on the phone with a CC (I use British CCs anyway). If someone were to give a crossed cheque, account payee, (which you can obviously do manually) I'd theoretically have a problem, although some banks ignore it, and will cash the cheque, or at least pay into a different account (this is not good - if anyone has heard of the chefziba case
    If this weren't enough, the banks apparently also did not know that a considerable part of the tenants had paid Yona with personal checks to his order, while the Real Estate Law requires depositing the checks in the banks. The banks' credit managers and CEOs must pay for this managerial blunder http://www.haaretz.com/hasen/spages/893065.html
    this is what happened. I "own" a house there, and am trying to get out of the mess. Let's see what happens
  • blu-kblu-k Forumite
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    Great article Martin!

    Just wanted to add that I read a great blog article the other day at economics.com.au - the author suggested that in the same way one can take their mobile phone number from provider to provider, we should be able to 'own' our bank account number, so we could move from bank to bank but wouldn't need to redo our direct debits every time.

    It would help to improve competition as well as making it easier for customers to switch banks.
  • PhiltheBearPhiltheBear Forumite
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    How overdrafts really work: Authorised overdraft limit: £1,000
    Unaurthorised hidden ‘paid limit: £2,000
    Unpaid beyond that
    You have to admire the profiteering genius of this system. Instead of not paying, the banks created a system where they would pay out, but would charge £35 a pop for every transaction - no matter how small - beyond that limit. It’s no wonder they now make from £1.6bn to £3bn a year from this. In the past once you couldn’t pay out you’d know as the payment wouldn’t go through. Yet this new system meant many many more penalty charges could be levied as people paid for things on cards in stores, and all went through fine without realising there’d be a £35 charge every time.
    But the banks often bounce payments and still charge. And that's what hurts those people who are worse off. I've recently become unemployed. Because there was a delay paying benefits to me I had 4 payments refused - each of which I was charged £39 for. My benefit is £59.15 per week.

    As someone who has worked for banks I know that there is no justification for a £39 charge.

    PhiltheBear
  • PhiltheBearPhiltheBear Forumite
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    ONe thing that should definately be investigated by someone and maybe should be another campaign for Marting is whne banks offer to write "Free" wills or reduced rate wills for clients.

    I recently saw a lady who a major high street bank wrote her and her husbands will free of charge a few years ago. He unfortunately died last year and the estate was worth £750k the said high street bank had insisted on being executors in the will and for basically performing the executors service and trasnfering the assets over to the wife with four small gifts to the children they charged £37.5k, this is criminal.

    The will they wrote, was OK but did not consider any inheritance tax planning or other assets protection but the fact that they charged £37.5k for what must have been at most 15 hours work for a solicitor is outragous.

    Many, many people will face the same type of thing.

    Just one way big banks make money.

    Hmmm. That's about a 5% fee. The banks say they'll charge 2% up front for being an executor. Then they will charge to deal with each asset. So, yes it's expensive, but the people who had the will drawn up would have been made aware of the charges. So it's their stupid fault for agreeing to them.

    I set up the probate processing for one of our major retail banks. 2% is a standard charge. But there's a whole shed load more charges they've got up their sleeves - all of which are published in their tariffs. I've seen a £8,000 estate reduced to £4,000 when those tariffs are brought into play.

    The best plan is to a) get a will drawn up by either a specialist will provider or a solicitor, b) appoint at least two executors and c) when the will needs dealing with the executors should hire in whatever expertise they need - be it bank, accountant, solicitor, whatever.

    But NEVER, EVER appoint a bank as a sole executor.

    PhiltheBear
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