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Unfair banking

Robert Peston | 08:19 UK time, Wednesday, 16 July 2008

Strong bankers will weep. But so too should most of us as bank customers.

Cheque bookBecause the Office of Fair Trading's study of how banks make money from current accounts concludes that charges are opaque, that there isn't sufficient competition in this market and that excessive profits are probably being made.

And it also finds that "the bulk of consumers pay little or no attention to the key elements of either insufficient funds charges or the interest they earn on credit balances". Are we thick, or what?

The other headlines are:

1) Banks make more out of personal current accounts than they do out of savings and credit cards combined;

2) The bulk of what they make out of current accounts comes from those controversial charges on customers who exceed their agreed borrowing limits (a stonking £2.6bn) and from net interest on debits and credits ( £4.1bn from paying us next-to-nothing on credit balances and charging us an arm-plus-other-limb on overdrafts);

3) Customers responsible for 1.4m accounts pay over £500 a year in charges, and four million incurred over £200;

4) Total aggregate revenue for banks from personal current accounts was £8.3bn in 2006, or £152 per active account (shout it loud: "these accounts are not free");

5) Insufficient-fund charges increased by 17% between 2003 and 2007;

6) Banks made £1.5bn in paid item and maintenance fees on an average aggregated unarranged overdraft balance in 2006 of £680m - a tasty return of 220% (I'd like some of that please);

7) More than a fifth of us are unaware of charges till we incur them;

8) Only 6% of customers switched to a new bank in the past 12 months, one of the lowest switching rates in Europe;

9) There's been some attempt by HBOS and Nationwide to compete on price (which most would see as a good thing) but the big banks, Barclays, Lloyds, HSBC and RBS compete on "quality" (or to put it another way, they make a bundle from the status quo).

The big point, according to the OFT, is that this is not a healthy market in which excessive profits are eliminated through competition: it is concerned that "additional profits made from less visible elements" are not being "fully competed away in terms of lower fees in other areas".

It adds that too much profit comes from vulnerable, low income and low saving consumers, or those who incur the fat charges for borrowing more than has been agreed. And this group is cross-subsidising better-remunerated and better-organised customers, who are given the so-called "free" banking service.

That's unfair, the OFT implies - and many would concur.

The implication is that the competition watchdog will endeavour to push through a radical reconstruction of this market.

If it were to succeed, the banks would end up making less profit from current account services, which is a horrible prospect for them when they're facing quite a squeeze from their imprudent lending of the past few years.

And many of us might have to get used to paying an explicit charge for banking services.

Although if the OFT were to succeed in actually improving competition in this market, we won't necessarily be worse off. It's simply that we'll know what we're paying, rather than kidding ourselves that our current account services are free.


  • Comment number 1.

    I have a bank account in europe too so i can compare. With my european bank, every transcation has a fee. It also interest, often as much as a high interest account over here.

    With my UK bank I recently went over my overdraft limit by £2 and ended up being charged £65.

    I'd much rather the euro system as it would be far cheaper for me to run

  • Comment number 2.

    It is all about a combination or a regulatory monopoly(or cartel) and the marketing concept of 'confusion marketing'.

    First: the unintended consequence of making it almost impossible to set up new banks because of regulation. (I am not saying regulation is wrong - just that companies in the business are inevitably protected from competition by virtue of the regulation.)

    Second: Confusion Marketing - business like banking, insurance and mobile phone deliberately make their tariffs so complex that it is impossible for anyone to compare them.

    It is almost impossible to reduce the regulation but we do have an OFT and competition law so it is not impossible to take action over 'Confusion Marketing', but for decades noting has been done.

  • Comment number 3.

    Steps to fix the 'Confusion Marketing problem:

    Legislation that stated that if a contract is too complex for the man in the street to understand than those terms shall be null and void.

    Yes I know that this would be a lawyers paradise but in the end business will reduce the complexity of their products and then we will be able to properly operate a free market in their services.

    I think Banks are nowhere near as bad as the Mobile Phone business, for example!

    Also the bundling of things a person wants with things he/she does not want should be prohibited. (I am thinking of the packages of services in various business sectors - particularly where a monopoly exists.)

  • Comment number 4.

    I am certainly not going to concur that its unfair that those who are able to manage our bank accounts so not to go overdrawn or time payments correctly are unfairly subsidised by those that cannot.

  • Comment number 5.

    I am not oposed to having to pay for a current account, provided the service matches the fees charged. There could be a set monthly fee which allows a specified number of transactions, with charges from a published tarrif for additional transactions, with a cheaper rate for electronic payments, than say cheques.
    However I would expect a reasonable rate of interest on my current account credit balances, and further progress in the faster payments system.
    It is several years since I last visited a bank branch, as I use internet banking to the full, and ATM's or cash back at tills to obtain cash.
    I have about 25 entries per month on my account, and would use paperless statements, but I find some of these are of poor design and quality, and the resultant image on my PC is then also poor

  • Comment number 6.

    I work for one of the 'big banks' referred to above, in the complaints department, and I agree that charges are currently too high (and that they end up penalising those who are already less well-off). However, I find it very frustrating when BBC presenters say that bank customers have "no choice" in a such a sweeping and generalised way; without pointing out that free banking IS free - if you follow one simple, golden rule.... Don't spend more than you earn! .. Because for every 'badly run current account' belonging to someone who is struggling with young children, redundancy or illness .... There is another 'badly run current account' which is funding a Sky TV subscription, QVC shopping habit or gambling/alcohol/drug addiction... Banks may well seek to exploit this situation, but at what point do people have to take responsibility for their own actions?

  • Comment number 7.

    I am sorry - but this is another example of the OFT seeking out to make markets more competitive but the result will be that most customers will lose out.

    My fear is that banks will move away from providing 'free' current accounts. Customers who are good with their money and never get overdrawn will end up having to pay for the right to have a current account. This will no doubt spread to credit cards - people who pay off the full amount every month - may be charged a fee (again - it wasn't so long ago there were annual credit card account fees)

    I am still annoyed with the OFT over the Premier League! As a customer I have lost out because of their involvement. I now have to subscribe to Setana as well as Sky on top of my season ticket at Arsenal to watch games! Yes Sky have lost their monopoly but is the consumer better off?

  • Comment number 8.

    You don’t' want to be charged for overdraft? don't spend more than you have. You are using a privilege and it should cost you, I don't care if the banks charge 50% on overdraft interest, you should not have gone into overdraft in the first place, you are spending money that is not yours!

    Paying for an account is ok as long as the service is fair (real time transactions and payments instead of making money off our money and inconveniencing us by having to wait 4 to 5 days for a payment to clear even when the company being paid uses the same bank! Give me a good interest rate on my savings, not a ridiculous 4 or 5%, so I benefit and you benefit.

  • Comment number 9.

    I would consider that I do indeed have free banking. My salary is, generally, paid into my current account on the 25th of the month. On that date I calculate the sum of my 10-12 Direct Debits payable on various dates over the next month, and transfer any excess into an interest bearing account.

    I accept that the interest paid on the credit balance in my current account is pitiful (my average is about £0.03/month) but having said that, I very much doubt that the interest the bank makes on my balance covers the cost of posting my monthly statement.

    Should I have an unexpected expense requiring a cheque, I simply log on to the internet banking system and instantly transfer the relevant amount back to my current account.

    I have held this current account for the best part of 20 years and have not paid a penny in interest or any other charges in all that time.

    The same goes for my credit card. I always pay my balance in full, and have never paid any interest on that either.

    With very little effort, you can use the banking system to your advantage - it doesn't take much brain power!

  • Comment number 10.

    As an IFA I am appalled by the (general) lack of understanding of how to run bank accounts (and make them work for you). Rules are simple:

    Account 1 - current account, receives all incomes. Makes a monthly transfer to account 2, and is used for "discretionary" spending (i.e. that which is not fixed/spending by choice). Search for account that pays interest when in credit and low fees when not.

    This account MUST be reconciled every month!

    Money for supermarket shopping should be withdrawn in cah, a limit set, and NOT exceeded.

    Account 2 - budget account, receives one monthly payment from account 1, (equal to total of DDM's and STO's) and funds fixed payments. Ideally is account paying daily interest, and payment in is made 1st of month and payments out arranged to be at end of month so account accumulates interest over time.

    This account MUST be reconciled every month!

    Account 3 - deposit account, high interest / internet account. Contains "rainy day / emergency fund" money, equivalent to three months total expenditure.

    Account 4 - investment account, contains ISA's, Bonds, shares, etc. Funded as and when surpluses over 3m expenditure are accumulated in account 3.

    I recognise this is the "ideal" situation, but it is what people should aim for, as account 4 can build in the better times and be used to top-up accounts 3 and 1 when times are not so good (as now) so as to avoid having to use credit, where generally the shorter the term, the higher the interest rate!

  • Comment number 11.

    Like the first person to write here I also have a Euro account, in fact two as I have lived in two EU countries. The costs range from 4e to 8e per month normally, so thats about 36-72 quid per year, for essentially free banking. Which is still at lot less than the UK banks make per customer. Provided you use their approved cash point networks you also pay nothing, sure if you stray outside the list the fees can be high but that is rarely a problem. What is more overdraft rates are around 9-10% for most banks here, compare that to 18% in the UK. However by far the most interesting UK bank con is sending money abroad. When I first moved here I wired cash to my landlord, it cost 25 UKP to send money to Europe. Sometimes I now send money back to the UK it costs 7p-70p depending on the bank here in Europe. I would say we are being ripped off!

    The UK banks will argue that they offer an excellent service with a good bank network. Well its nothing in comparison to what is available here, in the area where I live there is perhaps 2000 people maximum, we have two full service bank branches - none of this "please use the phone in the corner to call our call centre if you have a complex enquiry". I would be surprised if any UK bank would even visit such a town let alone open a branch in it.

  • Comment number 12.

    How about giving us the choice between a "free" bank account, where if you go overdrawn you pay the £20 fee/charge/penalty (or whatever), or an account where you pay a monthly or transaction based fee.

    You could make sure that the £20 fee/charge/penalty is in massive bold letters across the front of your contract, so everyone knows exactly what they are agreeing to. That way, those that are careful with their finances can still benefit and anyone who wants to risk it and goes overdrawn cannot blame anyone but themselves.

    I agree with your statement that it is "unfair that too much profit comes from vulnerable, low income and low saving consumers."

    But I definately do not agree with the part that says "or those who incur the fat charges for borrowing more than has been agreed"

  • Comment number 13.

    Being kidded our current account services are free, not kidding ourselves our account services are free...!

    This is yet another example of a less than honest banking culture.

    Why is the OFT shying away from regulation? Are they being bullied and threatened behind the scenes? A few simple rules would provide the clarity bank customers deserve.

  • Comment number 14.

    To be honest, I haven't had anything to complain about with my Bank.

    I don't often go in, but when I have had business to conduct I have found their Staff helpful and friendly.

    (With an almost painful attention to detail when explaining things! Including Service Charges.)

    But my affairs have been simple and I don't often pay Bank charges.

    I don't receive Interest on my Current account and I don't pay a fee for it either !

    My Bank is one of the Big Four (as was).

    Maybe I've just been lucky.

  • Comment number 15.

    I've noticed ongoing "creep" of current account charges as is: accounts which were sold as upgrades for £5 a month 10 years ago are charging £12 a month now, in some cases. The extra benefits they provide are modest too. Again, the banks rely on inertia to seal the deal.

  • Comment number 16.

    Like #1 - starquin10 above, I have a bank account in Europe but maintain a UK account because I still have occasional income there. The contrast is stark. I chose a bank which does not charge for overseas ATM transactions and the account is never overdrawn but, when receiving payments from another UK bank the BACS system is used and the transaction takes 4 working days. That this is totally unnecessary with modern technology is manifest from my experience in Europe where similar transactions attract a small charge but are instantaneous. BACS is simply an excuse for the banks to hold onto our money for a couple of days and take the interest. Since it is my money, not theirs, I find that indefensible.

  • Comment number 17.

    Hey, let's not feel sorry for Banks here. First, they need our money so that they can maintain liquidity and lend. Because of fractional reserve banking, banks get a good deal out of our money deposited with them. It's a two way street, they get to 'use' our money (unfortunately for many of them to gamble), they give us a pathetic rate of interest and we get to use their services. Charging us to use their services on a current account means they charge us to use our money which they 'need' to maintain liquidity and do business. Any form of charging on current accounts is one of the biggest banking scams out there, and the banks know it.

  • Comment number 18.

    What is the OFT smoking? There are banks that offer interest and banks that offer virtually no interest. Choice is there. If there is anything which "isn't working", it must be the customers. Perhaps they don't want to be charged for every single transaction or charged a flat fee each month. Perhaps they are happy for the banks to make their money "invisibly" from any money that happens to pass through the account. Who do the OFT think they are to mandate which way accounts should operate, that is for customers to decide. So long as there are choices that customers can make then they should keep their noses out.

  • Comment number 19.

    The OFT has taken 15 months to produce a report which includes statements such as:
    "there is a substantial misalignment between the banks’ revenues and their costs on many of their products and services"
    Translated into English, this means the banks are ripping their customers off.

  • Comment number 20.

    I would like greater transparency in banking charges. Common sense tells us that free banking was not cost free, however the true cost of the service is not obvious.
    However the timing of this effort by the OFT is a problem. The banking sector is in deep trouble for many reasons. A resolution to the unfair charges will probably result in some significant payouts and add to the difficulties. Lloyds TSB for example may have avoided the sub prime debacle, but is clearly vulnerable in this area. Its dividend yield is near 14% which implies the big investors are expecting a dividend cut and falling profits. Even if the consensus of investment analysts believe that it can increase profits over the next period. (Most analysts are of course connected to the banking sector.) It is of course even worse timing for the banks with rights issues brought about by the sub prime debacle

  • Comment number 21.

    Why can't I set up my own bank? thereby bypassing the need to commit myself to what is effect, just another service provider. Think of it this way, internet ISP's are service providers, to become your own service provider, all that need be done is to register with the body that provides a centralised range of addresses, which is in turn disributed to end users i.e. us. In this case, who do I have to apply to to have my very own sort code? I can then (provided I can get the correct infrastructure set up) allocate myself an account, and charge myself extortionate rates for my own mistakes and inability to provide myself with correct advice, I'll make a fortune!

  • Comment number 22.

    Well, I don't think anyones banking should be subsidized by charges to others (cross-subsidization between products is another matter), and banks could - and should - be more transparent about charges.

    Equally, I know a few of those 'vulnerable, low income and low saving consumers' and ' those who incur the fat charges for borrowing more than has been agreed' and have exactly zero sympathy for them.

    They know how much they have coming in, yet refuse to adapt their lifestyle - I'm thinking nights out on the lash with the associated kebabs, taxis, fruit machines and club entry don't qualify as requirements for survival.

    One of my closest friends incurred monthly charges for years, costing him thousands of pounds, yet refused to cut down his nights out. When I told him we was being an idiot, he agreed but wasn't prepared to change - that attitude isn't the banks responsibility to deal with.

  • Comment number 23.

    Why are we even bothering with this numpty obvious findings by the OFT.

    It took them years to stop banks 'hiding your money' for 5 days when you put a cheque in - even though as an IT man in a bank I knew a transaction goes through the same day (as long as it's dropped by 3pm)

    They allowed this to carry on for far too long and only now has something been done about it.

    If the OFT is listening - here's the next 50 years work for you (at the pace you go)

    1) Interest charged on day of debit (overdraft), but not paid on day of credit (when in credit).

    2) Interest lost when a bank makes a mistake not being refunded when rectified

    3) Banks reluctance to refund interest on instances of fraud - even claiming it's not their responsibility in some cases!

    4) Chip and Pin system which has made customers more vulnerable to fraud - not less as promised

    5) Good old card charges for withdrawing cash from machines - even after it's been proven these types of machines are commonly found in the poorest areas

    6) Making banks fully responsible for the staff they employ. Not allowing them to sell unsuitable accounts to customers.

    7) Don't get me started on business accounts - they are the biggest rip off. I'm certain it's because the banks think most small business are too bust running their business to spot all the sneaky charges that the bank has been applying

    I have to run my personal account like I would a business account - I watch everything and everytime my bank makes a mistake I charge them for the lost interest. Most people don't do that and it's just another scam operated by the bank.

    If banks make their accounts so difficult to understand and manage - then customers should have to pass a test first to ensure they are competent enough.

    Otherwise it's just lambs to the slaughter...

  • Comment number 24.

    #12 - Think about it.

    Who would select themselves onto the penalty-based structure? People who are careful enough to never end up paying any penalties. And the flat monthly fee? People who know they would get a battering from paying lots of penaties. The only way that you can make a profit out of that is by making the monthly fees high, meaning that the same group of people have a high-cost account as before. There is slightly more transparency over charges, but why not stick with what we've got?

  • Comment number 25.

    What ever happened to Free Will?

    There are lots of banks supplying lots of accounts. If some people are incompetent at running their accounts isn't that their problem? Why should I pay for their inability?

  • Comment number 26.

    itwasntmeyourhonour - I must reply to your post.

    I actually started looking into this, and the barrier for setting up your own bank is:

    a) The regulation and costs involved mean that for it to be a viable business you will need to lend millions.

    b) There is very little information available on how it's done

    c) The other banks will crucify you and burn you off.

    I looked at a non-profit making banking business model where you could borrow from the BoE facility (rather than using the LIBOR market) and lend at the same rate. In the current times this would mean you could lend below the LIBOR rate.

    A bit like the way Freddie Mac and Fannie Mae work in the states. A virtual 'state run' bank.

    Unfrotunately the popularity of this would stop the fat cats trousering vast quantities of money to buy yachts and rolls royce's and you would be destroyed (financially) within a few months, either by other banks or the government.

  • Comment number 27.

    The really big rip of by banks is the way they control the markets. Just look at how HBOS (or to be more precise their underwriters) held up HBOS shares to the 275p rights issue price then when they had enough subscribers let the price drop just before close of play.

    Such blatent abuse of the individual is now common place amongst the banks and a root and branch reform is essential from the BoE down.

  • Comment number 28.

    John_from_Hendon says : "It's all about a regulatory monopoly ... and

    ... Confusion Marketing - businesses like banking, insurance, mobile

    phone ... " ... "Steps to fix the 'Confusion Marketing problem' ...

    Legislation ... I know this would be a lawyers paradise."

    Dear John, and anyone else who thinks they are being fleeced by

    insurance, banks, mobile phones etc. Ask yourself : how many people in

    your family use a mobile phone / bank / insurance company. Apart from

    car insurance, all are discretionary. You can go insurance free, bank

    free and even (yes, honestly) mobile phone free. Yet you buy these

    services. Why? Because they are cheap, cheap, CHEAP! Now tell me, when

    was the last time you used the services of a lawyer w/o bracing your

    whole body for the financial assault. Yet these are the people whose

    pockets you wish to line.

    For heaven's sake just STOP for one second and consider who the OFT

    have gone after. Remember when they investigated Argos for overpricing

    toys? A trip to the car boot sale, local tip or any UK child's bedroom

    will tell you toys are cheap, cheap, CHEAP! Remember when they attacled

    the supermarkets for selling us expensive groceries. Since then prices

    have rocketed ... and still people throw away 33% of their food. Why?

    Cos prices were cheap, cheap, CHEAP!

    The OFT has one remit and one remit only: help moderate CPI

    irrespective of demand. If they really wanted to do us a favour, they'd

    go after the lawyers with their >£200/hr fees + expenses. Sadly

    parliament is full of lawyers, so don't expect any action on that front

    any time soon. In the meantime you can cheer as your private pension

    fund collapses under the weight of mounting losses for our banks,

    mobile phone companies, insurnace businesses etc.

  • Comment number 29.

    John_from_Hendon says : "It's all about a regulatory monopoly ... and ... Confusion Marketing - businesses like banking, insurance, mobile phone ... " ... "Steps to fix the 'Confusion Marketing problem' ... Legislation ... I know this would be a lawyers paradise."

    Dear John, and anyone else who thinks they are being fleeced by insurance, banks, mobile phones etc. Ask yourself : how many people in your family use a mobile phone / bank / insurance company. Apart from car insurance, all are discretionary. You can go insurance free, bank free and even (yes, honestly) mobile phone free. Yet you buy these services. Why? Because they are cheap, cheap, CHEAP! Now tell me, when was the last time you used the services of a lawyer w/o bracing your whole body for the financial assault. Yet these are the people whose pockets you wish to line.

    For heaven's sake just STOP for one second and consider who the OFT have gone after. Remember when they investigated Argos for overpricing toys? A trip to the car boot sale, local tip or any UK child's bedroom will tell you toys are cheap, cheap, CHEAP! Remember when they attacled the supermarkets for selling us expensive groceries. Since then prices have rocketed ... and still people throw away 33% of their food. Why? Cos prices were cheap, cheap, CHEAP!

    The OFT has one remit and one remit only: help moderate CPI irrespective of demand. If they really wanted to do us a favour, they'd go after the lawyers with their >£200/hr fees + expenses. Sadly parliament is full of lawyers, so don't expect any action on that front any time soon. In the meantime you can cheer as your private pension fund collapses under the weight of mounting losses for our banks, mobile phone companies, insurnace businesses etc.

  • Comment number 30.

    I have never paid a penny to use my current account in >20 years. This is because I follow a simple maxim, don't spend what you can't afford. Those who have cash flow problems should ensure overdraft facilities are set up in advance and never exceed them. I've no sympathy for those who haven't the basic discipline to manage their financial affairs properly.

  • Comment number 31.

    It is not just Bank Charges that need investigating by the OFT, they also need to re look at the Credit Card charges. £12.00 for being 1 day late on your payment (even though you notified them beforehand by phone and letter) is unacceptable. Also, to add a further interest charge for being late which then takes you over your credit limit which in turn then allows the bank to charge you another £12.00 is ridiculous. Just like Bank Charges do not reflect the true cost to the bank the same applies to these Credit Card Charges despite the fact the fee of £12.00 was capped by the OFT they are still far to high and are causing financial hardship. The accounts of Banks and Credit Card companies should be open to Independant Audit so we can all see the true cost.

  • Comment number 32.

    Unfortunately Mr Peston, you seem to have lost the balanced arguments and seem to side with the government and government bodies...

    Firstly, why don't you look at the studies of the costs of banking to consumers in other countries - you will be surprised to find that the UK is one of the cheapest in the world - blows a bit of a hole in the OFT argument.

    Secondly, this government, the OFT and the FSA seem to have decided that people are not responsible for their own actions and therefore if anyone goes overdrawn then it must be the banks fault. Surely it is the individual - if you want to make sure people spend responsibly then teach financial education in schools as it seems that the edict of my parents which means that I avoid going overdrawn or borrowing more than I can afford is not being given to the current generation.

    Thirdly, transparency... well we would have transparency except that this government and its quangos such as the FSA have brought in so much regulation and legislation that if you want a career for life then I suggest you go into Compliance - the fastest growing area in the banking industry.

    Fourthly, you would think the FSA was there for the consumer - but as I have had from first hand experience when I went for an interview - there only concern is ensuring they have jobs for the future. I quote "Dear boy, why are you worrying about the consumers, the role is to ensure that we are seen to provide information, justify our role and hopefully expand the budgets available." Absolutely astonishing...

    Finally, the OFT say only 6% of those sampled have changed bank accounts in the last 12 months. ONLY 6% - do the OFT have a target figure??? What is acceptable - 10%, 20%, 50%.... Frankly 6% should be seen as reasonable in this market. I take financial services from more than 5 companies - and a choice of banks that is around 10 and other financial institutions that runs into 100s... But my supermarket shopping is restricted to around 4 or 5 stores.

    Get some perspective. A final thought if bank accounts were a license to make money then why do all the new entrants focus on the other products - such as credit cards, loans, savings, etc... maybe because there is a huge infrastructure cost as people still want branches. So it costs £1 or whatever to produce the overdraft letter - but what about all the other costs - it is easy to be over simplistic.

  • Comment number 33.

    "Are we thick, or what?"

    Well, the OFT likes to think we are, anyway. I do get fed-up with government agencies doing this sort of research and claiming business is being unfair. Only this week, I heard Ofcom complaining about the price of text messages on mobile networks - if you don't like the price, don't send the text!

    With bank accounts, I agree, it is different - we all need one if we want to get paid and don't want to keep our cash under the mattress. And while some charges have been unfair in the past, I think we get a pretty good deal here in the UK.
    Did the OFT consider that the reason we don't switch banks is because we see no need to do so? Personally, I don't pay a penny to the bank. I keep my balance low transferring any excess to an online saving account and I don't go overdrawn.
    I don't pay for internet banking, for the convenience of being able to withdraw cash from a machine 24*7, for using a debit card in shops...

    Where the real problem lies is in the excessive charges small businesses have to pay for bank accounts - every transaction, even getting change for the till costs money.

  • Comment number 34.

    Don't kid yourself that your banking is free?

    Ok - If I don't go overdrawn I don't pay anything. I may not gain 10% interest, but then if I didn't use a bank I wouldn't get any interest and would lose more money due to inflation.

    Its a valuable service that pays me to use it, great! They make money in interest off my balances, I get some too, how are we losing out?!

    I never visit a branch and do everything online, I rarely contact my bank in any form so its hard to be unhappy with the service. If I did receive poor service then I may move and it isn't hard to do so.

    If I have a balance I want to make more money on, then I shop around for the best deal on rates. I never have enough in my current account to worry about getting a great deal, as I'm not stupid enough to keep alot in there!

    I really don't see how bringing in monthly charges will benefit me, only the people who don't manage their account properly.

  • Comment number 35.

    #10 "As an IFA [snip]"

    Which should surely make you think twice before castigating the knowledge of the none CIFA qualified public when a report shows how unclear and unfair the practices of banks are.

    I'm a commercial analyst for a large company, and my wife earns more than me - however... I remember the time when I was under the thumb of the banks. Back when I didn't have two pennies to rub together, and my bank was only too glad to make indecent amounts of money from me.

    Income £600 - Expenditure £580. 1 unexpected bill of £25. £5 unauthorised overdrawn. £35 fine (letter + charge).

    Have a guess what happend next time that cheque got represented ? £30 charge.

    Now try and get back on an even keel... hang on, next month - £665 expenditure (including charges + cheque), £600 income... and so it went on. Welcome to Hell, courtesy of a black horse.

    You cannot live without a bank account - well, I suppose you could. Assusming you want to pay even more for utilities and can convince the government or your employer to pay you benefits/wages in cash. Good luck.

    And yes, you can change bank accounts... of course, this is detrimental to your credit rating.

    Pleased to say that now I do have cash, I am able to keep it out of the grasp of the Big 4. They've had their pound of flesh from me.

  • Comment number 36.

    Another thought..

    If everyone kept their bank accounts in check and there were no fees/charges for the mismanaged accounts as there were none. Do you believe the charitable banks would not be looking to charge our plump well managed accounts?

    Lets not kid ourselves the current system is not representative of the service we all receive be it as a "good" or "bad" customer.

    Since when was anything free, especially in finance. We should all be charged fairly for the service we all use.


  • Comment number 37.

    Unfair banking? Well lawks-a-mussey me. I thought that was the whole idea, take as much as possible and give a pittance back in return.

    There was a time in this fair land when the majority of people didn't need a bank account.

    But the bankers have worked assiduously over the last 40 years, or so, to wedge themselves, as essential middlemen, in as many transactions as they can. Only small cash deals to go now and they're working on it.

    It's tantamount to a confidence trick, where we give them money to invest for virtually nothing, only to have them wag their fingers at us and 'fine' us for being so immoral as to go overdrawn by a penny without permission.

  • Comment number 38.

    To the moralisers who are tut-tutting at those who are not managing their finances as well as they should: You should hope that these people never heed your advice as the day that they do and stop paying penalty charges, your free banking will come to an end and account fees will be introduced because your accounts will have nobody to subsidise them.

    By all means, a bank should be able to charge any extra admin costs incurred (maybe a couple of quid when someone goes overdrawn), and they can make a profit by charging more for debit interest than for credit interest but it is unreasonable to expect other people to completely subsidise the running of your account, account maintenance costs money, the people who pay should be the people using the service.

  • Comment number 39.

    I take exception to your comment: Shout it loud, these accounts are not free.

    That is nonsense - the vast majority of retail banking accounts (operating within the published terms and conditions of the account) are completely free.

    You can have a cheque book, debit card, cash card, access to tens of thousands of ATMs in the UK, direct debits, online banking and all that offers for absolutely nothing in the UK. It is FREE, and this is rare in the developed world. British banking clients have it good.

    Yes there are charges if you borrow from the bank either authorised or unauthorised and the fairness of this is well debated as is the fact that you don't get credit interest on a large number of accounts.

    But lets face it, if you stay in credit and operate within the rules, retail banking does not cost the consumer a penny. And that is a good deal.

  • Comment number 40.


    I did not intend to say, or imply, that we are being fleeced - just that it is almost impossible to compare the products and to make an informed choice.

    Markets only operate efficiently when there is reasonable access to information. There clearly isn't in the banking market.

    Are you telling me that just because we use mobile phones we can compare the products. I believe I recall similar reports on the mobile industry to this one on the Banking industry.

    I also made an aside about the bundling of products - that is if you want a bank account we will 'give' you travel insurance etc. or texts with minutes in the mobile phone industry or you want satellite TV we have a bundle for you etc. Are you really saying that depriving people of choice is a good thing?

    Confusion Marketing has been taught in business schools for decades as a way of protecting your market for large monopolies and preventing customers comparing products. It is wrong from a consumer's point of view as it is designed to prevent informed choice.

  • Comment number 41.

    Possible solutions:

    Force employers to provide the option of payment in cash. No bank, no access to credit.

    Create an efficient 'barter market' for those without cash, "That'll be 1 Baby Spice CD for that potato please, you want to eat don't you?"

    Revise competition laws to ensure that a banking/credit organisation cannot hold more than x% of market share.

    Force the FSA to actively investigate collusional practices between banks, or at least initiate a price war

    Bring back Home Economics to the classroom. Help prevent the generation of tomorrow spending on what they don't need,

    Bring back those small saver pigs that Natwest made. Incentivise saving.

    Increase the small print on billboards/adverts to readable size, with a statutory warning "Inability to pay us on time may result in your ability to live freely severely impacted."

    Provide free financial advice, in the same vein as legal aid to those who repeatedly use overdraft facilities.

    Ban home makeover shows and prosecute producers that repeatedly tell us that house prices will always go up, for providing financial advice without qualification.

  • Comment number 42.

    Just a quick point:

    Why is the bank's claim of free banking any different to the statement made on BBC TV and radio shows 'Call free on 0800....'? In this instance it is our pre-paid licence fee funding the calls.

    Perhaps Robert you could do an expose on such BBC shananigans!

  • Comment number 43.

    4. At 08:55am on 16 Jul 2008, jonnie_london wrote:
    "I am certainly not going to concur that its unfair that those who are able to manage our bank accounts so not to go overdrawn or time payments correctly are unfairly subsidised by those that cannot."

    If the cost of your bank account is subsidised by somebody else, then you are certainly NOT managing your bank account.

    Charges for going overdrawn are supposed to reflect the cost to the bank. The cost of running your account is unrelated to whether or not another customer is overdrawn and therefore it is illegal to make them pay for your bank account and you are profiting from crime.

    If I take a DVD back to Blockbuster late, I'm charged to compensate them for their loss of a potential rental - I am not expected to pay for the rentals of the next three people in the queue.

  • Comment number 44.

    why am I not allowed to post??

  • Comment number 45.

    I don't really have any objection to banks changing people who go overdrawn. However I do object to the fact they pay next to nothing on credit balances. In this computerised age, the actual costs of providing a current account (excluding an overdraft facility) must be minimal, and the banks will no doubt be making a good rate of interest themselves on the money in such balances.

    Some competition is needed here. Perhaps the Government should create some itself by offering a full, free, high-interest current account service via the Post Office (or event through the nationalised Nothern Rock!)

  • Comment number 46.

    why can I post that I'm not allowed to post, but then not post what I want to post?!!?

  • Comment number 47.

    Why are we spending good money on the OFT going after an industry in meltdown? Surely the taxpayer has better things to do, like backing Northern Rock customers mortgages.

    If people can't understand how to run a bank account, perhaps the best option is not to have a fee charging current account, but to opt instead for a basic savings account which simply won't allow them to spend money they don't have and will pay interest.

  • Comment number 48.

    dear BBC, I have been trying to post now for the best part of 3 hours (on and off, I do have a job to do occasionaly) and have only managed to get ones though that say "I can't post", making me look somewhat of a fool.

    will this one get through?


    seeing as it has absolutely nothing to do with anything other than slightly venting my frustrations.....

  • Comment number 49.

    maybe you don't like numbers, how about I write them out.....

    Doctor_Martin - post 24

    You are probably correct, I imagine the profit margins would take a hit, but if I'm honest, that's not something I'm going to lose much sleep over. As long as the banks are able to turn a profit, they don't have much to complain about in my opinion.

    Don't forget that banks are earning money from our deposits through investments and interest as well. If for example (and this is a totally arbitrary figure, completely off the top of my head) the banks make 1 percent profit a year from the money in our accounts, and you have ten thousand pounds in there, they have made one hundred pounds profit.

    Now I realise not everyone will have ten grand, but there is a sizeable amount of people out there who have much much more. Surely this profit is enough to pay for "free" banking for those that can manage their finances?

  • Comment number 50.

    Actually starting a Bank isn't easy.

    There is a lot of regulation to prevent (ahem) con men from setting up in business.

    However there is a popular option.

    The Credit Union.

    A number of Communities have set up their own mini savings and loan style 'social bank'.

    There is one in my Town.

    And also, several Communities have set up their own 'currencies' LETS (local exchange trading schemes).

    So if you and your friends feel so bad about high street Banks, there are options there.

    But each of those options, to work required the support of thousands of people in their Communities.

    But they do work.

    Over to you !

  • Comment number 51.

    wwwooooooooo :o)

  • Comment number 52.

    A slight snag with Interest on Current Accounts.

    For the average person who may have an average daily balance of 300 pounds over the year, Interest might be 21 pounds.

    Most people don't leave thousands sitting in their Bank Accounts unless they are going to have need to spend it soon.

    Now, Banks look at the average cost of all their Deposits including Current Accounts, when deciding how much they need to charge in Interest.

    If Interest is paid at high(er) rates on all current accounts then probably one of two things will happen.

    Deposit Savings Rates will fall, generally
    or Borrowing Interest Rates will rise.

    In the end they will rebalance the equation.

    People should be educated about Money management (household etc) when they are at School.

    I have met quite a number of people who although Mathematically astute, are all at sea when it comes to financial planning (even on a day to day basis).

    Our education system should do more to help equip the future Citizens with the knowledge they need to cope with an increasing complicated world.

    It would be nice if Banks brought back the Bank Manager and the old Loan assessment Interviews.

    Some people would lose out (ie not get the money they want) but they would also be less likely to get themselves in over their heads.

    People do lie when applying for loans, and people do act irresponsibly.

    It is certainly unfair to blame the Banks for all of the problems.

    After all they are just giving people what they ask for !

  • Comment number 53.

    As usual its not my fault that I don't abide by the banking rules. I just blame someone else. Its not my fault that I go overdrawn and get hit by charges. Its my right to have a free overdraft.

    Personally I am not totally happy with my bank but I have looked elsewhere and concluded that I can manage my money best with the devil I know. I have worked and lived in Europe and Middle East and Far East and prefer the UK system.

    That said we could do with a bit of innovation. 15 years ago a group of friends set up an exchange trading online system (swaps) to transfer funds from one location to another to avoid bank charges. It worked very well but was based upon trust and zero costs. One day someone will come up with the brilliant low cost idea but until then we will have to fund this gross inefficiency.

    Remember the disparity on car prices between continent and UK in 1999? Imports sorted that. I saved 30% on a car but had to follow Belgian rules to purchase it.

  • Comment number 54.

    Hands up those of us on this blog who actually work for a bank.

    Hands up again those of us who feel aggrieved by our employers might.

    Hands up again who would actually do anything about it....

    Bank bonuses are better than most aren't they! funny where all that money came from :o)

  • Comment number 55.

    "Banks make more out of personal current accounts than they do out of savings and credit cards combined"

    Now why doesn't this surprise us, especially when Barclays stopped paying interest on customers current accounts this year, since apparently we customers don't value interest enough.

    Obviously they must think we all just enjoy giving our money to a bank for free.

    Its about time someone like the OFT stepped in, but as usual I get the feeling this will be a lot of bluster and no action as always.

    Banks will do anything to make money, so I for one have no sympathy for the devil. Hope you've all been short selling the banks as they'll get a taste of their own medicine.

  • Comment number 56.

    Whenever I have to stand in line waiting my turn at the bank counter I wonder who is paying for:
    The bankers scurrying around.
    The bank premises.
    The IT equipment and renewals.
    The shareholders' dividends.
    All the back room activity.
    Security etc.
    I keep my current account black and low. Hopefully the bank is not making any money from me.
    Then I look around and observe the others in the queue. Are they really supporting all of this finery?
    Then if the line is really long I get to musing on the number of times the money in my current account is lent out at interest to others.
    On average, money lent out at a bank will soon get deposited back in that bank or another.
    If one bank runs a bit short it will borrow at the LIBOR rate from the banks that have a glut.
    Then if the queue is really really long I wonder what would happen to the bank if everybody had enough money and did not have to borrow any.
    Would the bank have to put rates up so that its costs would be covered by those left borrowing?
    Alternatively if everyone borrowed money would the rates come down?
    Normally at that point I get to the front of the queue and I get back to a reality of sorts.
    It is just as well I did not queue all day outside NR or I could have worked out why the government borrows money rather than just printing it.

    My bank attempts to keep the queues short. Presumably to stop customers thinking too much?

  • Comment number 57.

    I pay $11.00 per month in Canada for basic banking services. This includes 50 transactions and free use of my bank's ATM. Use other banks and it can cost up to $3.50 per transaction.

    On the other hand, if i go into the red, it only costs me $5.00 once per month.

    The UK system pays for itself by penalizing heavily the people who don't balance their budget; in Canada (and many US banks) everybody is penalized.

    I don't know which system is worse.

  • Comment number 58.

    Having both current account and savings account,I often wonder why so much time is given over to the former and so little is said about the latter,the dismal interest rates offered by all the banks does absolutely nothing to encourage saving of any kind.
    I personally would like to see a huge improvement in the interest rates for savers and not only knocking on about borrowers rates.

  • Comment number 59.

    I am generally happy with the current situation. The amount of interest I would earn on my account is insignificant (especially when the taxman has had his share as well) compared to having to pay for each transaction and/or an annual fee, so I'm happy for the bank to pocket the interest and keep providing the service for free. I stick excess cash somewhere where it will earn more money, although I appreciate that for some, the concept of excess cash is a long-forgotten memory.

    I'd say that, for any bank manager with enough nerve to hold out, there's a lot of us who would switch to a bank that guaranteed a 'free' account based on current rules if most banks started charging merely to have an account, or per transaction.

  • Comment number 60.

    I have a theory; if banks started charging their customers per transaction, maybe the number of overdrafts will fall as account holders actually check their bank account before shopping, as they don't want to incur too many transactions in a month (i.e. they adopt forward planning). As someone who now rarely uses an overdraft (but does not bank with the big four) I certainly would.

    Of course the net result would be less spending in the shops, which would also impact the economy as sales fall and savings rise. Banks on the other hand will find a new way of extracting cash from their customers.

    Be careful what you wish for, you might not get what you expected.

  • Comment number 61.

    I cannot understand why people complain about bank charges if they go overdrawn without the banks permission. Isn’t that tantamount to steeling, taking money without permission of the owner.

  • Comment number 62.

    All this is down to a simple matter of ethics......

    Is it morally right for an institution to create the bulk of its profits off the back of the poor?, to offer the rich and middle class in our so called class less society subsidies paid for by the poor?

    Is it right for the poor or those in financial trouble to be penalised in ways that would make a loan shark proud?.....Is it correct to charge the equivalent of over 1000% APR on the smallest of temporary loans?

    Some would complain: 'why should I pay anything for my accounts?, after all I manage them well, not going overdrawn by keeping the account topped up'...

    Indeed, just why should you pay anything?, after all its always been 'free banking', why change it now?

    Well at least thats what it appears to be, but for sometime this free banking has been partly paid for with the very skin off the backs of the less fortunate, and in recent years the banks, with no regulations to say what's fair or not have just gone crazy with charges.

    Do people realise just what the banks have been getting away with? - i mean who charges insane amounts such as £100 just to borrow £1? - the action is nothing but that of a loan shark.

    You say 'they should manage their accounts better'.....i say 'if they dont have the funds available then how about a simple policy of DONT GIVE ANY MONEY!'. The banks actions are no different from that of a loan shark, deliberately offering you an automatic small amount of funding, just to hit you hard on charges 5, 10, 20 times or just whatever they desire. which they do, deliberately, there is no denying that, they of course won't admit it but they all know how the system is being played to their advantage.

    They are fully capable of making the system decline any debit card transaction where there is insufficient funds. To bounce a direct debit costs them next to nothing - i mean what service are they providing for the so called 'service charge' - is the service a charge for non service? - no temporary funds were provide, no real costs were incurred, so why charge? - because they can, and it hits the poor guy, thats the plain and simple reason why!

    People who are struggling with their finances, with no financial buffer on the account would literally have to check their current bank balance every single time they make any purchase , no matter how small, as without that financial cushion - a direct debit could have come out a day early, a bank charge could have been applied without knowing it, interest charges could have just pushed it over the edge etc....

    Then they hit you with £35, now the £1 or so you were overdrawn, is now £ struggle to pay that, and a direct debit now fails....ok so now its £36 + £35 for the direct debit, oh and another £35 for goin over again...oh and interest, so now that £1 is over £100....and the cascade effect continues....soon the £1 costs you £1000....and it doesnt stop! - your'e never able to recover and the bank hits you with charge after charge until your financially dead.

    I've seen this happen to many people, just in this way. The banks destroying people over a few pounds.....most of them now on daily charges, mounting up and up and up. A few pounds they gave them when they didn't really want it, when they were unaware of being overdrawn or on the edge. Thats what they rely on, a system which has debits coming out in an ad-hoc fashion, with balances that don't update instantly, normally not a problem if you have a financial cushion, but for many this is not the case.

    For those who say 'well you agreed to the charges', i would like to point out that We live in a society where you cannot function properly without a bank account. People have no choice to accept the terms, as all the banks have the same policies. The old 'you agreed to it' argument just doesn't wash anymore, i could sign a contract that states I agree for them to remove limbs in the event of default, but it doesn't make it right, it doesn't make it legal.

    So i say to all those sat in their ivory towers, saying its the customers fault for not managing the accounts better - when you look at your nice healthy, charge free account, just think of the lives that have been crushed to partly pay for it.

    No matter which way you paint it, what they have done and continue to do, is wrong wrong wrong. Its ethically wrong, it will hopefully proved to be legally wrong - its a complete disgrace that this has allowed to carry on for so long, and i hope to god they pay for it in whatever is to come.

  • Comment number 63.

    I have chuckled at some of the comments on this page. Some people are clearly ignorant of the facts.

    Free banking in the UK is widespread if you are able to manage your finances correctly. You can easily arrange an overdraft facility where needed which you will rightly pay interest on. You wouldn't expect a free loan would you? There is little excuse for receiving charges so why shouldn't the banks penalise you. If they didn't it would only encourage people to be careless. And where genuine mistakes have been made you will find most banks are quite okay to refund one charge a year.

    With regards to interest rates there are some exceptionally good rates out though. You need to watch out for the promotional rates of Abbey (8% for a year) and Lloyds (6% for a year), but banks such as HBoS offer 5% ongoing (allowing for rate changes) on the first £2500. This means if you are in credit you can easily earn interest on your day to day money. Although the cap is at £2500, if you have more than this you really should have a savings account - there are even plenty with no notice withdrawals at rates over 5% if you may need quick access.

    I fail to see where in this process you incur any cost as a cosumer. This is how I run my accounts and I would be livid if I were to be charged for a standard current account due to the inability of others to manage their finances in the same way.

    I hope Robert doesn't get a bee in his bonnet about this one or it may well be the end of free banking in the UK which results. You talked up the run on Northern Rock, you're talking us all further into the credit crunch... please, just give the banks a break so they can go on happily making no money out of me whilst I go about my life spending what I can afford!

  • Comment number 64.

    The ignorance lies in what you believe is free banking - it is free for you, whilst those less fortunate pay the fee for you.

    To manage an account properly requires a financial buffer on the account - not everyone can get an overdraft on request as not everyone has a big fat salary goin into their account monthly.

    I agree, there should be some form of penalty if you consistenly keep going overdrawn....but it should be proportional, not a racking up £1000 of charges for what could be as little as £1 overdrawn - it is that that is WRONG - it is daylight robbery, it is the action of a loan shark, and worst of all it is hitting those with the LEAST amount of money.

    Of course those who enjoy not paying any charges want to continue doing so, as they continue to use the excuse of why should i pay because others don't manage their finances properly....well if everyone managed their finances properly where would the 6 billion in revenue come from to ensure you have free banking?

    Basically you just want it to be free for yourself and to hell what is paying for it, why not go one step further and get some child slave labour in to keep costs down and give you more subsidies

  • Comment number 65.

    Why not offer the customer 2 choices when they open an account.

    Option 1) In the event you have no funds, on the attempt to debit or withdraw funds, we simply say no.

    Option 2) In the event you have no funds, we'll give you some but charge you X, Y, and Z.

    Option 1 is relatively easy to implement, so why not offer it?, its quite simple - when i inadvertently request more money, you say no and dont give me any, you decline the transaction. Simple - costs you nothing.

    And of course they will never do this, simply because they won't make their 2.4 billion, the 2.4 billion they need to fleece the poor guy to ensure those with a good stable income get their low interest rates, their 'free banking', their nice banking features to keep them happy. Not to mention the huge profits which get filtered into the fat cat pockets.

    The point is, this is ethically and morally a huge miscarriage of justice, and it's body's such as the OFT, and legislation such as the UTCCR that was put in place to stop such things.

  • Comment number 66.

    another important aspect of banking is money ransfers its odd how with electronic transfer it doesn't get there at the speed of light. it always appears to remain in some banks account acrewing interest for the bank

  • Comment number 67.

    I have my old bank accounts in the UK and my current accounts here in Australia where they charge the monthly account maintenance fees being touted here.
    It doesn't change a damn thing. All you have now is all the costs you had before plus the monthly fee, plus various transaction limitations and costs. I switched from an Aussie bank to HSBC as soon as they offered their free banking here.
    I can't stand the UK Government and regulator interference to nanny people because they're either too stupid or too damned irresponsible to avoid these charges. I used to be someone who regularly encountered these charges in the UK but I soon learned to restructure my habits to avoid them and make sure any excess cash was moved to an interest bearing account from one of these transaction accounts. As for the person who states that their Euro account has an 8 euro/month charge and then it's free banking, duhhhh! How about an HSBC (or other) bank account linked to an online saver account. This has no charges provided you live within your means and don't spend someone else's money and provides the interest bearing element for any leftovers.
    Stop screwing responsible people for the benefit of the irresponsible in society. If anything, all that needs to be done is to make sure that the fees/fines are representative of the true costs of admin. That's all.

  • Comment number 68.

    ' If anything, all that needs to be done is to make sure that the fees/fines are representative of the true costs of admin. That's all.'

    Exactly - if thats all they did, then i and many others would not have a problem. But the problem is the charges are ludicrous, and i have seen people pay 1000 pound for an initial 5 pound oversight.

    That cascade effect makes it impossible for people in financial difficulty to ever recover which is the main problem with the current system.

  • Comment number 69.

    People forget it is other peoples money they are spending.

    So, all the People want Free banking ,but are they prepared to Deposit their Money for free ?

    No, every Depositor expects to be paid Interest.

    So every Borrower has to pay the depositors Interest.

    The Bank as middleman charges for its arranging and organising process, like a Plumber charges for fixing your pipes.

    You want you Pipes to work you pay the Plumber !

    If your pipes are in good order, you don't need to call out the Plumber.

    Likewise in Banking.

    You keep your Finances in order and you don't have to pay the Banker.

    Simple isn't it?

    You just have to stop living in the I want it now culture and start saving up for the things you want.

  • Comment number 70.

    Ps I don't work for a Bank.

  • Comment number 71.

    It will be the same old story, those of us who run our accounts properly will have to pay for all the idiots who do not.

    A bit like the UK benefits systems.

  • Comment number 72.

    Great. So now I will probably have to pay to run my current account because some people who "borrow" my money to spend on what they can't afford, think its unfair to be fined for doing so.

    Perhaps I could pay extra road tax to help pay peoples speeding fines too?

    If you haven't got it, other peoples money isn't yours by right. Make alternative arrangements and budget properly. It isn't the banks fault, it is your fault.

  • Comment number 73.

    #72 pablofreudianis

    "Perhaps I could pay extra road tax to help pay peoples speeding fines too?"

    Hey. Why not? You already pay extra insurance to pay for the damage uninsured drivers cause!

  • Comment number 74.

    I pay GBP12 per month for a Lloyds Gold Card account. It's stupid. Contrary to what the bank tells me, there is no real "added value".

    I want to change accounts, have done for ages. The reason I haven't is because I am afraid that it will somehow affect my credit rating if in answer to the usual question about how long I've had my bank account the answer is two months rather than 25 years.

    I don't know if I'm right about that but certainly my perception is that I might be refused credit for switching bank accounts.

  • Comment number 75.

    Re 74:

    Then open another account at another bank now but don't close your LGC account just yet - wait a few years.

    Also go to the other banks and explain your perception and see what they say. Perception and reality may be worlds apart.

    I hold a number of accounts, most are almost dormant. It is a very efficient way of doing your accounts.

  • Comment number 76.

    #74 BewilderBabe

    As an addition to #75, I would first speak to Lloyds and get them to change your Gold account to a normal current account.

    This should not affect your credit rating as it is effectively the exact same account (same acc number, sort code etc), you just don't pay for all the "extras".

  • Comment number 77.

    I think this is bad news for me and a heck of a lot of people!

    Sure, banks make a fair whack of money on interest margins and some other invisible fees (card interchange etc), but they have been doing that for quite a few hundred years now and I guess we should get used to it. After all, most of our banks are private companies - it is their job to make money!

    I'd be very worried if banks started replacing excess borrowing charges (charged to people who can't be bothered to manage money properly) with charges for everyone.

    I am pretty careful with my money - why should I pay for the staff the banks need to employ in their debt collection type departments?

  • Comment number 78.

    Some of what I read here really gets my back up so here are my obsevations from the blog and the comments posted

    1) The article states that banking is not free. This is plainly untrue. Banking is free in the UK if you stay in credit. You get a bank account, money transmission mechanisms such as debit cards and cheques, the use of the banks ATMs, the use of other banks ATMs, the use of telephone and internet banking and the branch network all for nothing....if you stay in credit

    2) Some are suggesting that income from fees subsidises 'free if in credit' banking. Again this is untrue. 'Free if in credit' banking has existed for decades in the UK long before charges and fees existed. People who manage their account poorly are simply massaging the banks profits.

    3) The idea that banks exploit people on low income as they pay more charges and fees is rubbish. Indeed this is insulting to those on low incomes to suggest they are less capable of managing thier money. People pay charges and fees if they manage there money poorly and live beyond thier means....simple as that. The level of income has nothing to do with it.

    4) Picking up on the tone of some of these posts, some people seem to view banks as some sort of public utility or charity. They are publicly listed private companies whose number one goal is to make a profit for their shareholders. If you dont like this, put your money with the countries only publicly owned bank - Northern Rock (now that doesn't sound too appealing does it?)

    5) Banks make profits on interest margins. This is the core banking business and has existed for centuries. If banks couldn't do this they simply wouldn't exist.

    6) I agree with the OFT that the charges and fees are not transparent. Customers, when opening a bank account need to be told what the chargers are and how they will incur them. Not hide them in the small print.

    7) I agree that some of the charges are extortionate. However, this is been debated and will most likly be resolved in the courts (like late payment fees for credit cards which can now be no more than 12 pounds).

    There we go rant over.

  • Comment number 79.


    Jon, whilst I agree with the general thrust of your arguments, I disagree with a few of your points;

    1) A minor point, but banking isn't free, people who stay in credit just aren't being charged for the costs being accrued in the system. The costs just don't find their way to the in-credit customer, as they get paid off by other income streams. The banks' argument is that if you remove those other income streams they will need to recoup their "losses" by charging everyone.

    2) That may have been correct in those previous decades, but unfortunately times change. Banks now offer many more services and the fees charged for going over your limit have obviously become part of what's helping to pay for implementing and running these new ideas.

    You then say in 4 and 5 what I feel is the crux of the matter; Banks are businesses.

    Businesses that are capable - and are now used to - making many, many millions of pounds, due in part to these charges. If we remove the charges they will say we have to pay a fee so they can continue to make the "many, many millions" (rather than removing the charges, but continuing with "free" banking and only making "many millions").

    Whether you, or I, or anyone else agrees with this doesn't really matter. In the end the banks have to answer to their shareholders.

    Guess which way they'll choose to go!

  • Comment number 80.



    Although I take onboard your argument about free banking, I do feel this is more a case of interpretation. To me, my current account is free as I have never paid anything to my bank for the service they offer.

    Obviously, to provide this to me free requires the cost of such services to be offset by other income streams. However, I do not agree that fees and charges exist soley to prop up 'free banking' in the UK, or the new services that banks offer.

    Indeed, the 'big four' operate in the retail, commercial, corporate, wholesale and investment banking markets both nationally and internationally. The 2.9bn revenue from charges is small change to the banks when you consider the size of thier balance sheet.

    Charges exist for a number of reasons such as covering the cost of administering unauthorised borrowing, late or defaulted payments, as well as providing a deterent for the above. Anyone who lends money wants some protection that they will get it back and charges are one way of ensuring this.

    However, clearly banks have been extracting unfair profits from charges, and I address these issues in points 6 and 7 in my previous post.

    PS I dont work for a bank.....

  • Comment number 81.

    Gosh, according to the Guardian website, one hedgefund has a short position in B and B to the tune of 8%

    Talk about unfair Banking!

    Thats kicking someone when their down that is!

  • Comment number 82.

    working for one of the Big five banks in the london area as a branch manager, I see on a regular basis at least 10-15 customers a day complaining about charges on their account.

    I agree with the fact that if we didnt charge - free banking would disappear - however i have become more and more disillusioned with the way in which the charges are applied. It seems that the way in they are applied are deliberately confusing to c/ms in order that we can maximise the penalties the c/m pays.

    For example - a c/m has a £100 overdraft and is £99 overdrawn. They visit a shop on the 30th June and buy an item for £4.00 - the bank can choose to either pay the pay the item or refuse to pay - either way the c/m will be charged £35 as an unpaid item charge or a paid item charge. This the c/m can probably understand.

    However our bank will more than likely pay this item because not only does this mean we can charge the c/m £35 for the transaction - but also charge a monthly Unauthorised overdraft charge of £28 for the month of June.

    The monthly overdraft charge of £28 will be made for June as the payment happened on the 30th June and we will take this from the account at the end of the following month 31st July.

    Then comes the Killer Blow. Because the c/m only realised the next day that they were allowed to go over their limit - they visit the branch on the 2nd July to pay money back into their account. Only to be told by me that due to the fact they are over their limit in July as well that will incur a further charge of £28 at the end of August!!

    So a small indiscretion of £4.00 has caused the c/m to be charged a total of £91.00.

    Plus from the moment of the transaction on the 30th June - it will take until the 30th August - 2 months - until we apply all the charges incurred.

    Now I am not an idiot - but even I would struggle to remember that I was going to be
    charged at the end of August for something that happened in June. Imagine having to try and remember this if you are on the breadline - trying to make every penny count. you get towards the end of august - you think your account is all okay - you forget that the £28 is going to come out on the 30th august. you are at your limit again £99 overdrawn - we apply the charge and take the c/m to £127 overdrawn. Low and behold on the 1st september the c/m will be charged a further £28 at the end of october.

    It drives me insane trying to explain this c/ms day in day out - I struggle to understand it myself. I have no issues with telling everyone that the only reason we apply charges at the end of the following month is because we can maximise the confusion for the c/m and maximise our profits.

    Plus I still have yet to be given a satisfactory explanation by my employer as to why some payments are allowed to go through and some are refused.

    Personally if we have the abilty to refuse transactions on some occasions - surely we should refuse all transactions if the c/m has no funds. That really is robbing the poor to pay the rich. We should have a duty to our poorest c/ms to help them manage their accounts.

    If we decide to charge for this service - fair enough - I am sure that c/ms would rather pay £10 a month for the privilege of having a full bank account - rather than £91 for making a £4.00 indiscretion.

  • Comment number 83.

    Even though I am not sure I am happy with the ideology of offering more money to the people who already have lots of it (by paying them interest) and taking more money from the people who don't (by charging them interest and fees), I can say that I know the interest rate on my current account and my overdraft limits and potential charges. This is by spending 10 minutes reading the booklet that came when I opened my account, and that regularly comes in the post with updates on these rates.
    As a responsible adult when I opened my account I agreed to pay those charges if I go over my limits, so I take care not to exceed them. I am very happy that I do not have to pay a maintenance charge (the norm in many latin american countries) or a transaction fee (frequent in European countries) and that I can enjoy free banking. People who complain should just try to be more responsible and not spend money they don't have.

  • Comment number 84.

    As much as I love the English attitude of outrage when we find out a there is a profit being 'legally' made at the expense of the consumer.

    Spare a thought for the plight of an Englishman moving to France. Over here the majority of current accounts don't carry an interest rate - in fact I managed to completly confuse my "local personal bank account representative" when I suggested that it should.

    I was horrified to find out that the standard charge for a current account was ?5 per month. Again when I suggested that I wanted an account that didn't have a monthly charge, I received an incredulous and somewhat condescending
    'ca n'exist pas chez nous'.
    (they don't do that)

    Of course I found a couple of ways of getting round these issues, but my point is this.

    In France most people do not get current account interest, and have to pay a monthly charge simply for having the account + debit card. and there will always be 'hidden charges'.

    In France if you exceed a set monthly limit (even if you have plenty of cash in your account) your card will just stop working, which is great to combat fraud - but highly inconvienient if you have some heavy spending then need to buy your food shopping.

    The current account system in the UK is very good in comparison, and perhaps if people were a little more careful then banks would not be making such huge profits.

  • Comment number 85.

    F unfair banking next to the big dippers[libor charge] by the dodgems[no charge for bank mistakes ] on the merry go round[overdarft charges] in the haunted house of horror [fractional reverse banking]

    Welcome to pleasure Island where the whole family can be taken for a free ride to the bouncy castle [£20 per bounce ]


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