Build your perfect bank account.

[righty]

Re: Build your perfect bank account.

Celestine believe it or not but because Gerry Adams the Rev Paisley & Stormont won't permit it

[argentarius]

Re: Build your perfect bank account.

I think your Irish geography is a bit off, righty. Celestine's point was that the Northern Irish (yes, those represented by Gerry and Ian) were, relatively speaking, getting stuffed and the Southern Irish were not.

Sorry argentarius I believe that I have already mentioned this way up at the top of the thread, post #3 in fact.
If you missed it I have highlighted the salient points for you.

CB - I interpreted your original (post #3) comments about being willing to pay for services you value as meaning "added value" services. Most people talking about being willing to pay for services don't mean that they are willing to pay for ATM withdrawals, cheque clearance, etc.

The banks can make profits the same way the have always made profits by lending a savers money to borrowers & charging interest on the loan.

Building Societies changed when they bribed customers to vote for change many of who must now be regretting that decision

This might have worked when interest rates were 15%, and current accounts paid no interest.

It certainly doesn't work when interest rates are around 5%.

I've given this example before, but I'll give it again.

If a current account, say, has an average balance of £500 - that's average across the whole year, including the days in the month when you have hardly any money at all - then the bank will earn around £30 in interest on that money at LIBOR. If it pays out no interest to the account holder, that's £30 of net interest income.

You really think that £30 is enough to run the whole current account operation and give a reasonable profit?

If so, you are incorrect.

And if you say "oh, but, the bank will earn more than 6% on that money, because it'll lend it out to loans customers, or mortgage customers, or whatever ..." then:

- for one thing, you are saying that banks should subsidise current account customers by over-charging other customers, which isn't particularly fair or logical; and
- those other products don't necessarily make money anyway. Typical tracker mortgage rates are under 6%. Typical fixed mortgage rates are close to 6%. Loan rates might appear higher, but that's because the level of defaults is higher.

[Curlyben]

Re: Build your perfect bank account.

Just out of interest, argentarius, what would you consider "a reasonable profit".

I believe that one of the main issues surrounding the whole "charges" issue is the already vast sums of profits the banks are making.
On the one hand they are saying that they cannot/will not offer truly free banking and yet they then post frankly ridiculous profits. Do they honestly NEED to make such obscene profits !?

We know they make a large percentage of these profits from currants accounts and the associated "fees", so why not reduce the amount of pure profit that they actually make from us, their customers and depositors.

<disjointed rant>I must admit I am at a lose concerning the current "one upmanship" of PCA interest rates, especially when you read the terms. You mentioned removing the interest paid would only give a small amount of profit return, so, it's a start.
In reality the value of PCA interest is generally a farce to your everyday account holder, especially when the T&C's are taken into account. Mostly interest is only paid on credit balances under £2.5k.
I'd be happy if the bank didn't offer me credit interest at all and actually acted in a manner suggested by their over inflated Spin departments.

All I really want is some fairness and openness in my financial dealings.
These "people" hold the most amount of sensitive personal data about us, yet continaully treat us as second class citizens.</rant over>

[righty]

Re: Build your perfect bank account.

OK Arge can you tell me how the banks managed to operate satisfactorily for many decades before the present day

[argentarius]

Re: Build your perfect bank account.

Hi Curly

Firstly, the level of profits banks make from their current accounts is somewhat exaggerated in popular perception. Few banks show, in their accounts, their profits broken down to such an extent; they normally go down to a level of "retail banking" or similar which probably includes residential mortgages, current accounts, savings accounts, personal loan accounts, etc.

When the papers print figures estimating the money banks "make" from charges, they normally estimate the income, not the profit on current accounts. So they are vastly higher than the real bottom-line profits.

My simple answer - which you won't like - is that there is no limit on what is a reasonable level of profits. Banks are in a competitive business. All of us can open current accounts with one of more than a dozen banks. Few people question whether Tesco, Sainsbury's and Walmart-Asda make an unreasonable level of profits, because they accept - to some extent - that they are competitors and that the market will prevent them from making unreasonable profits. For some reason, people don't seem to believe that this applies to banking.

My longer answer would be that banks need to make enough money on their current account businesses to satisfy the level of return their shareholders expect for the level of risk they are accepting. If they aren't making that level of return, then shareholder theory would say that they should simply stop offering current accounts because they are destroying shareholder value by continuing to do so.

Your comments about PCA credit interest rates are interesting. Much of the focus in competition between banks - particularly from the newer entrants like Abbey and A&L (both interestingly about to be under the Santander umbrella) and Halifax has been on credit interest rates. But as you say absolutely correctly the difference that 1% or even 5% on credit interest rate makes to the average customer is next to nothing, because average current account balances are very low - and, to my recent professional knowledge, falling rapidly as the credit crunch, high fuel and food prices etc., hit.

The main reason we've got in the mess we have with fees - and the perception that they are excessive and unfair - is that nobody has attempted to compete on these. Instead they've managed to keep the focus on a frankly irrelevant measure, the credit interest rate.

Even more interesting, IMHO, is that the supposedly ethical players - Nationwide and Co-op Bank - who could have done something really radical here and said "forget credit interest, we are going to help out the poorer members of society by competing on debit interest and charges" - have done absolutely nothing different to the incumbent players and other new entrants. We could have had a really dynamic current account market if there had been competition on credit interest rate from Abbey/A&L/Halifax - who would have cleaned up the "better off" customers who never expect to pay any charges - and Nationwide/Co-op - who would have cleaned up the "worse off" customers who expect to pay charges regularly.

Anyway, enough of "what might have been".

righty

I've already answered this a few times. The main difference is that prevailing interest rates were very significantly higher, at the point that PCAs became "fee free whilst in credit". And before that, PCAs carried significant fees for almost every transaction, which almost every account holder would have paid. I'm guessing you're too young to remember that - as am I, actually.

So because prevailing interest rates were higher, banks made far more money out of standing balances.

I'm not convinced, though, that current accounts were actually profitable at the time immediately after "fee free whilst in credit" came in. I suspect that there was lots of cross-subsidy involved.

[righty]

Re: Build your perfect bank account.

I do remember, very well in fact, when banks & their managers were valued members of the community.

Also I fully understand your argument but isn't it just that view which finds us in the position we are today.

Can it really be justified that the poor should without any real choice subsidize the better off. I'm no communist but I find that whilst it is widely held by the bankers in particular such an argument to be abhorrent

[scoobydoo]

Re: Build your perfect bank account.

Argentarius

Are you saying then that in theory IF we were all in a good financial position and no-one had problems and no customers exceeded the OD limit the banks would have still offered "free banking"

I dont think so . Which is why I believe they were taking advantage of those that had problems to subsidise the rest of the current account system.

I think this is proven when we know how much it costs to bounce a DD - say £4.00 max so in theory if charges are capped at £10 they would still be making a large margin percentage wise.

But when the banks think they are loosing the freedom to charge what they want the immediate threat is - we will have to charge all customers now for banking to make up the loss.

I think we are all fully aware baks have to make a profit - all we have ever wanted is for that profit to be spread more fairly over all customers, not just those in financial difficulty being taken advantage of.Also I agree we need the comparison between banks to be clearer as rightly or wrongly we all feel they are in a type of cartel as far as charges are concerned.

[argentarius]

Re: Build your perfect bank account.

Can it really be justified that the poor should without any real choice subsidize the better off. I'm no communist but I find that whilst it is widely held by the bankers in particular such an argument to be abhorrent

No, I'm not saying that's justified at all. I'm not exactly a communist either (my Grandma was, in her teens, but that's another story ...).

I wholeheartedly agree that the current banking system is stupid. It is not fair at all that free banking for the better off is subsidised by expensive banking for the poor.

And yes, I freely admit (addressing a Scoobydoo point) that the charges for those who go into unauthorised overdraft are excessive compared to the costs involved. But they need to be, because of the unfairly generous deal that those always in credit get from the banks.

As this thread is about building a perfect bank account, I suppose the problem is that the answer will be different for different people.

Those always in credit might want high credit interest rates and no fees. That's fine, but the banks will lose money on those accounts.

Those always in debt may not care about credit interest rates, but want low fees. That's fine, but the banks will also lose money on those accounts.

Those with a mind towards equity might want be prepared to accept lower (or zero) credit interest rates on their balances, in exchange for slightly lower charges for those who are always in debt. But once again, the overall picture won't make the banks enough money.

The point I am trying (and pretty obviously failing) to get across, is that a realistic system of charging for bank current accounts, which earns the banks an adequate return on capital, but which is fairer than the current messy situation, will probably consist of:

- no interest on credit balances;
- far higher interest rates on debit balances (particularly for the newer entrants who charge far lower rates than the incumbent banks); AND
- lower, but still not as low as you would like, fees for unauthorised transactions OR fees at the sort of level you would like for unauthorised transactions, but monthly account fees for all customers.

I cannot see a mechanism for giving the banks an adequate level of income from current accounts without incorporating all of those elements.

If (and I use that term advisedly) people believe that it's possible to force a system much like we have today, but with far lower unauthorised transaction fees, I really think that is wishful thinking because, if I was a bank, I simply wouldn't bother having thousands of staff and billions of pounds worth of infrastructure earning me next to no profit.


My answer to scooby's first point is "definitely not". If nobody ever went overdrawn, we would never have moved away from the "everyone pays charges for banking even when in credit" model.

And my answer to scooby's final point is that in fact things will likely get even more consistent across the banks, if there is some mandatory requirement for fees to be capped (say). Just look at the credit card market - 99% of card issuers now charge the supposedly maximum £12 for limit breaches/bounced DDs/whatever, and most have increased their debit interest rates quite significantly to compensate.

I guess your point is that there is no bank offering very low fees, for unauthorised transactions, as an alternative choice for those unhappy with the high fees charged elsewhere. But that's because, to make sufficient money, such accounts would have to have a huge monthly account fee - and who's going to switch to a £100 a month account, when they are already strapped for cash, just because it "only" charges £2.50 for unauthorised transactions?

[enaid]

Re: Build your perfect bank account.

Well the way I see it is, if the banks had not been greedy and took it for granted that Joe public was easy pickings. If indeed they had not published their, IMO, obscene profits, then maybe things would be a lot different.
I don't think I have ever heard it said that there should be no charge at all for going over your overdraft, or being late paying and having cheques bounce.
The matter had to be addressed as an act of unlawfulness and again IMO there must be a hint of truth in that as the banks would have faced the judge before now.
So as far as I can see all they have to do is charge us whats fair, both in cost and profit and the job is sorted.
I think barclays may have thought they had cracked it being the first to "Lower their charges" and yet again me thinks we have been bamboozled.
Just when are they going to start treating us fairly?
I think the first bank that does, may find themselves in a lot better position than some are in today.

[Sapphire]

Re: Build your perfect bank account.

On the subject of Direct Debits, perhaps if companies were made to apply for them on the date agreed ie 25th of the month instead of 3-7 days early and the banks didn't pay them out early, then people wouldn't be going overdrawn.

I know thats what happened to me many times. Perhaps if the offending companies/banks were fined for applying early then they might stop doing it.

Actually I have found out (though talking to a manager at 1st Credit), that you can claim your money back from them if they do apply early, apparently you have to write in and prove that they have done it ie show a statement with the offending charge and they will pay it back to you.

Now I think thats worth investigating isn't it ?

[Tools]

Re: Build your perfect bank account.

This is taken from Direct Debit - your rights

Your rights

Direct Debit is one of the safest ways of paying your bills. Organisations using the Direct Debit Scheme go through a careful vetting process before they're authorised, and are closely monitored by the banking industry.

The Direct Debit Scheme protects you and your money by means of the Direct Debit Guarantee.

This Guarantee is offered by all banks and building societies that take part in the Direct Debit Scheme. The efficiency and security of the Scheme is monitored and protected by your own bank or building society.

The Direct Debit Guarantee

• If the amounts to be paid or the payment dates change, the organisation collecting the payment will notify you normally 10 working days in advance of your account being debited or as otherwise agreed
• If an error is made by the organisation or your bank or building society, you are guaranteed a full and immediate refund from your branch of the amount paid
• You can cancel a Direct Debit at any time by contacting your bank or building society. We also recommend you notify the organisation concerned.

and from one of their leaflets

So how do I get back any money
paid in error?
If this happens, you should contact your bank or building
society. They are responsible for giving you a full and immediate
refund – even if the original error was made by the company
collecting the payment.

[Sapphire]

Re: Build your perfect bank account.

Thanks for that Bert BUT BUT BUT does the 'guarantee for errors' cover early collection, because sure as eggs is eggs they will find some way of wriggling out of it, slippery little suckers.

Right so here's the plan I shall wait till one of my D/D's go out early and even if its just by ONE day I shall complain and see what transpires, because I happen to know that its SKY's policy to apply 5 days before the agreed date and then they rely on the Bank paying on the exact date.

Right carry on peeps, sorry for hijacking the thread.

[Tools]

Re: Build your perfect bank account.

Q. Will the payment always be on the same date every month?
A. Normally payments will be made on the same date each month, quarter or annually according to the payment frequency. If any payment due date falls at a weekend or on a bank holiday, the organisation is obliged to debit your account just after that due date unless they notify you in advance of a change of date.

Have highlighted the word after.

[HaliMac]

Dear Banks

I'd like to propose a review and revision of the basis on which we do business together - by injecting a bit of mutual respect, honesty and transparency into our dealings.

Mutual respect would mean you affording me some courtesy in branches and on the telephone, such as using my name when addressing me and actually looking/acting as if remotely interested in providing me with good service. I will promise to reciprocate.

Good employer practice would help here too - you only get good service in my view, if it's from an establishment that's also a good place to work.

And while we're at it, how about giving your employees a little discretion? Empower them to do the occasional favour, like waiving the odd charge for a genuine mistake, or knocking the odd percentage point or two from a loan APR? They'll be happier people who will in all probability become a little more profitable - and you'll also gain some valuable reputation and kudos - hint: you can't buy that in advertising agencies

How about bonuses for genuine letters and messages complimenting 'above & beyond' service, as opposed to how many 5hit insurance-based "products" your people manage to flog me? This respect would be reciprocated by my agreeing to make every effort to conduct my account well; adhering to my side of any agreements we make and notifying you early in the event of any problems.

Honesty would mean that instead of piling repeated charges on 'delinquent' accounts, you would consider asking serial offenders to take their business elsewhere. This may go some way to vindicating your oft-quoted position that these charges are only there to cover your costs. Allow me to share a secret with you at this point - we customers all know this to be a big fib and that you do in fact make outrageous profits in this way.

Transparency would mean you charging what it costs you to do business, plus a reasonable profit margin that was open and agreeable to both parties.

It would also mean an end to the kind of war of attrition you have been waging on us, your customers, for many years; hiding onerous terms deep in micro-print in ads and constantly revised Ts & Cs - and mean a strict limit on you being allowed to amend Ts & Cs too often in the first place. The bear traps and tripwires that form the mainstay of our current relationship (to my detriment), really need to go if we're going to make this work.

If you took the time to talk to me, you'd doubtless be surprised to find that actually I don't mind being charged a small amount for a transgression, but you should not be allowed to push people into poverty with usurious interest rates and repeated and cumulative punishment. Persistent and wilful transgression on your part should cost you your licence, not slapped wrists and nudge-nudge-wink-wink from cosy 'regulators'.

I also like the idea of a 'reserve' margin, such as the one recently introduced by Barclays, but pioneered I believe, by NatWest aeons ago (wasn't it called the 'pink zone' or something?), whereby I'm not penalised at all for small, short-term transgressions. I think a reasonable service fee, appropriate to the costs of administering it, would be acceptable here.

And that's it really - fair transparent, 'consensual' banking - you can make a healthy profit if you treat me well, provide me with decent money management tools and I can access my money when I like and do with it what I like.

Ideally, I'd prefer to see a return to mutuality in financial services (although I am not against capitalism and shareholding in principle). Meeting shareholder demand for ever more ways of fleecing depositing customers is arguably incompatible with good banking practice - there is an inherent conflict of interest in this relationship. You're probably going to balk at this last suggestion - but things would be a whole lot healthier and rewarding on both sides if you didn't.

Regards
Mr Hal. I. Mac - one of your customers

[Delta]

Re: Build your perfect bank account.

Mmmm interesting thread. I have one or two things to add.

1. Please allow me to speak to someone that can speak my language and lives in this country and so has some knowledge of it. Like for example where my bloomin county is on this island.

2. While on the subject of call centres, please allow the staff to be able to deviate slightly from the script. Whilst it can be very amusing when you realise that you have thrown them with a question, it doesn't help get your question answered.

3. Please do something about the meetings/breaks that supervisors and managers at call centres have, why oh why is every single one of them in a meeting at the same time when you want to speak to someone further up the chain?

4. Loyalty..... instead of concentrating of pinching customers from other banks, how about you look after the ones you already have (look after them right and they won't jump ship to another bank). For instance, how about some loyalty to the people that don't change mortgages every 2 years? Because my mortgage is an old one, I can no longer send payments to it via internet banking, I can no longer pay it in cash (I have to pay the bank the cash and they have to issue a counter cheque to pay it), and I was never informed that this would be the case.

5. ID issues, now I know that we have to prove who we are these days, but please remember that not every one drives or goes abroad, so without a driving licence or passport, those of us in the situation have to jump through hoops to prove who we are, and are made to feel like a 2nd class citizen because of it.

K thanks