End the Madness of Free Banking
http://news.bbc.co.uk/1/hi/business/6148776.stm
First Direct, the branchless bank, is going to start charging a monthly fee of £10 to some of its customers.
The fee will apply to those paying less than £1,500 into their account each month or those who have an average monthly balance below £1,500.
The bank say that this is so that only customers with dormant accounts will be targetted. Meaning that they are charging £10 a month only to those low maintenace customers who presumably don't use up as much in the way of resources, which then serves to subsidise those that do.
This is being touted by consumer groups as a first step towards an end to free banking, a football that the banking community kick around with relish from time to time. But banks are supposed to make money by using the money that we bank with them, giving us a small amount of interest and keeping the rest. The other source, natch, is debt, hence first direct waiving the £10/month fee for customers who take out loans, or (I suspect) have overdrafts. The banks are in profit, so why the need for a pay banking service? First Direct tell us that it is so they can focus their attentions on their more important customers. Yeah.
Recently the banks raised the idea of introducing charges for the use of ATMs. This, they said, was necessary to cover the costs of ATMs. But ATMs are there to replace bank tellers. Clues in the name, children. The introduction of ATMs saved money, and because of the flawed way in which they work, they also encourage debt, as anyone who has gone over their overdraft limit following an incorrect balance statement will testify. If they do start charging, people will start queueing up for the humans, and then in ten years time the banks will probably start considering charges for peak times (like, y'know, lunchtime) for the extra staff they will have to take on to make up for the drop in ATM use. Lookin' busy, makin' money...
An end to free banking would be unethical for a further reason, and that is that there is now no real alternative to having a bank account. The powers that be have slowly made it more and more difficult to live without one, citing their usual list of bogeymen (benefit fraudsters, tax evaders, etc.) as a reason. So soon, every life will come with a £93 surcharge + extras (for the NIR) and a further £10/month fee from the age of 16 for the rest of your life.
Grr, and, needless to say, arg.
First Direct, the branchless bank, is going to start charging a monthly fee of £10 to some of its customers.
The fee will apply to those paying less than £1,500 into their account each month or those who have an average monthly balance below £1,500.
The bank say that this is so that only customers with dormant accounts will be targetted. Meaning that they are charging £10 a month only to those low maintenace customers who presumably don't use up as much in the way of resources, which then serves to subsidise those that do.
This is being touted by consumer groups as a first step towards an end to free banking, a football that the banking community kick around with relish from time to time. But banks are supposed to make money by using the money that we bank with them, giving us a small amount of interest and keeping the rest. The other source, natch, is debt, hence first direct waiving the £10/month fee for customers who take out loans, or (I suspect) have overdrafts. The banks are in profit, so why the need for a pay banking service? First Direct tell us that it is so they can focus their attentions on their more important customers. Yeah.
Recently the banks raised the idea of introducing charges for the use of ATMs. This, they said, was necessary to cover the costs of ATMs. But ATMs are there to replace bank tellers. Clues in the name, children. The introduction of ATMs saved money, and because of the flawed way in which they work, they also encourage debt, as anyone who has gone over their overdraft limit following an incorrect balance statement will testify. If they do start charging, people will start queueing up for the humans, and then in ten years time the banks will probably start considering charges for peak times (like, y'know, lunchtime) for the extra staff they will have to take on to make up for the drop in ATM use. Lookin' busy, makin' money...
An end to free banking would be unethical for a further reason, and that is that there is now no real alternative to having a bank account. The powers that be have slowly made it more and more difficult to live without one, citing their usual list of bogeymen (benefit fraudsters, tax evaders, etc.) as a reason. So soon, every life will come with a £93 surcharge + extras (for the NIR) and a further £10/month fee from the age of 16 for the rest of your life.
Grr, and, needless to say, arg.
posted by Hamilton's Brain | 9:46 am
9 Comments:
Ooh, some excellent points...
There is an alternative to having a bank account though. Cash. Makes life more difficult, but to restore the status quo between banks and customers, maybe those of us who can should start keeping our money under the bed.
It does seem that the banks will now have us over that metaphorical barrel. Let’s just hope this idea goes the same way as ATM charges. There was enough of an uproar about those that the charges were dropped on most machines.
I was amused though when I read that First Direct’s chief exec said he wanted to focus on his 'most important customers'. I was under the impression that ALL customers were important, not just the ones with the hefty salary or large overdraft.
I grew up in Australia where bank charges like those described are standard. I once had an account where I could only use the ATM four times a month and would be charged any time I entered a branch. My account had no cheque book, although internet banking was free. The reason for this strict regime was that I did not deposit enough money each month. Must have been my fault for being a recent graduate on a starting salary wage.
I would be outraged if this sort of thing were introduced in the UK. It is not fair to penalise the poor and those on modest salaries in this way.
I too grew up in Australia, where we have had fee based accounts for a long time.
I used to think that paying for an account was wrong, but look at this another way, banks provide a service. A safe place to keep your money or borrow money from. This costs money to administrate.
Services cost money and someone has to pay for them eventually.
I'm not denying that the banks are making huge profits, but a lot of that is not from you and I, but from corporate banking and deal making.
Look at the analysts reports and you'll see that retail arms of many banks are not the profit centres you think they are. It is only the other businesses that these companies run that make the huge profits.
Yes, but Little Bird, they don't just keep our money in a drawer, do they - they use it to gallivant about on the currency markets, racking up huge profits for themselves, the swine.
Exactly Patroclus, none of said huge profits find their way back into our current accounts although we could be said to have "loaned" them the money. In fact the term "free" banking is decidedly suspect. It will be interesting to see if the banks close ranks, or whether one will offer "banking without additional charges" and take on extra staff to cope with the rush. Even then I don't suppose they'll accept all comers. This looks like an attempt by the banks to cash in on people who can't take their business elsewhere, and that they are relying on the customer inertia of those who could go elsewhere not to take a principled stand on it. The same penalising of the least able to afford it applies to ATMS - I live in a village 8 miles from anywhere with one cashpoint. There is a £2 charge for withdrawals. I choose not to use it, but I'm pretty sure that not everyone has that choice, which is why theres a charge.
I'm currently visiting Australia and have been exposed to bank charges for the first time. It was a bit of a shock, but when you tell people that back in the UK it's free to run a bank account they look at you like you've got two heads.
Mind you, I don't think the $5 (#1.88 - no pound sign on this keyboard) I'm paying each month is too bad compared to a tenner by First Direct. Who are they kidding?? How come the people who suffer most when things like this are introduced are those who could barely afford it - like the elderly and the unemployed. It's legalised theft no matter which way you look at it.
If the bank promises to give me ALL the interest and dividends it's gains from using my deposits, I'll happy swap it for a tenner. Until then..... well, they can stick it where the sun don't shine.
I moved to New Zealand a while ago and was surprised to hear about these odd things called "banking fees". The banks over here do indeed use their offer of free banking as a major part of their marketing, as if it were something to be proud of, but it's still impossible to get served by a teller at lunchtime! Fortunately, most banks also offer an online-only savings account that they don't charge for, isn't that nice of them?
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