Upfront current account fees aren’t the answer

totally agree.

The unfair part is that if you mistakenly go overdrawn by a few pence you are not informed, and are charged large fixed sums, added to daily. It is not meant to be a deterrent, but is a scam introduced by the bank to make money.

A bank account is one way of receiving and of paying out money. There is very little difference in the methods used, between one bank and another. So we have account to account transfers (BACS, FPS), cash deposits or withdrawals (ATMs, branches, cashbacks at supermarkets), payment cards (debit, credit, contactless) etc. In fact, for the money systems to work conveniently there needs to be no differences in the systems. How easy each bank makes it to use each of these facilities is where they can compete. I have such accounts with five banks in the UK and use whichever makes it easier to complete that type of transaction. I dont by which I mean I dont close one and use another; I simply use one more than another depending on what type of transaction I want to do.

malcolm r, I agree with you that it’s unreasonable to judge a bank’s overall charges by assuming the use of regular unauthorised overdrafts. However, I disagree with your implication that unauthorised overdrafts are the customer’s fault. Quite often, a customer can get stung by surprise direct debits for such things as obscure recurring annual insurance premiums for policies they have forgotten they had, or throught they had cancelled when the company had lost their instructions. Or the various scams where the customer thinks they are buying a single item when in fact the small print says they are entering into a subscription. I lay the fault on the bank for this type of unauthorised overdrafts. If the overdraft is not authorised, then why on earth did the bank authorise the direct debit when there was clearly not enough money in the account in the first place? The answer is, of course, so the bank can charge these extortionate fees. I really don’t see how the bank can justify calling it an “unauthorised” overdraft if it was the bank itself that authorised the direct debit which made the account go beyond its authorised overdraft limit.

clint, it is still the customer’s responsibility to remember their recurring payments, and to ensure they don’t get into unwanted subscriptions – we cannot blame the bank for these errors. Whilst I agree (and have inferred) that a rare inadvertent slip into the red can happen, my criticism was with the “regular user of unauthorised overdrafts” cited by Which? This is not due to “surprise” transactions.

I totally agree. Why should I have to pay bank charges just because others do not manage their finances wisely?

It’s actually the other way around, Brian. Currently, the “others who do not manage their finances wisely” are subsidising your bank account. If it weren’t for them, you would surely have to pay bank charges. Does it still seem fair to you?

Ian, “The unfair part is that if you mistakenly go overdrawn by a few pence you are not informed, and are charged large fixed sums,”. I don’t know how your bank charges, but mine allows a £15 buffer to cover this eventuality before it charges.

This is a very dangerous situation for Current Account users. Be very careful with ‘standing orders’. I moved my direct debits to a new bank, my standing order to a cancer charity of just £4.00 per month continued to be paid for acouple of months, and I was faced by a bill for over £90.00 before realising what was happening. I believe the banks should be forced to give an ‘opt-in’ choice for those of us who do NOT want an overdraft facility.

I live in the country and use my local post office to withdraw cash/deposit cheques.

It makes no difference whether a bank pays its own staff or a third party such as the post office to carry out these manual transactions. Someone still needs to pay for the service to be carried out. Currently the cost is spread out across customers; I’m suggesting that only the customers who use those services should pay for them.

If we are going to be fair then the transaction costs for online transfers and card payments need to include all the costs involved in providing these services and not just the transaction costs with the infrastructure in place. I have a friend who worked until recently in security etc for one of the larger banks and the ongoing cost is considerable.

Visiting your bank for “advice” might then also be chargeable – branches and their staff cost money! This all illustrates the problem – how do you charge for all the “services” a bank provides, how do you ensure those charges accurately reflect the cost involved (a current topic – it can’t be done realistically, can it?) and how do you protect those vulnerable people who have a lot of transactions to fund?
Banks have evolved charging regimes over a long period; the danger of trying to impose a “quick fix”, particularly by people outside the system, is they will get it wrong, and we will all suffer.
As things stand, one contentious issue for current accounts seems to be the amount paid for regular (authorised) overdrafts. In the knowledge that you require to borrow money regularly you could trawl the banks to find the best deal; as stated above charges vary from 6p to £60 over three months – is this not “competiton”? I’d be more worried if all charges were the same. An alternative, if it were cheaper, would be to take out a loan to cover your regular dips into the red?

What an arrogant attitude. You are completely ignoring the needs of disabled people, particularly those with a visual impairment, who have no choice but to use a telephone banking process, or branch visit. This latter is not always an option open to them with the way in which banks are closing branches up and down the country.
Your comment about the choice of using your own bank’s ATM against one belonging to another bank also shows that you have ready access to such a choice. Those who live in many towns and smaller urban areas do not have that luxury.
The banks make a lot of money from their cosy relationships with each other and with our money to give everyone free banking and this is how it should be.

Malcom R says: “how do you [the bank], charge for all the “services” a bank provides?”
Answer. The bank holds the investors’ money, which it then invests to make a profit……simples!

Ian, the point I was making was how do you put a true cost on every single service the bank provides to each customer (that can then be passed on to the customer).

Andy, both you and Wavechange have raised the issue of card charges. As you infer, small transactions on contactless cards will cost something to process.If we pay the true cost for all the services we use from our bank, these could be substantial for a heavy user.
It did prompt me to think of Credit Card charges; these are paid for by the seller and can be around 2% of the purchase price. I presume the main charge here is for the “up to 56 days” loan of money to the buyer, as the actual processing charge should be the same, irrespective of transaction value? Many years ago you could negotiate with the seller that if you paid by cash (or cheque with the sadly-defunct guarantee card) they would reduce your purchase price to reflect the credit card fee. I believe that was then made illegal (I wonder who the main lobby group was?) In effect every retail transaction includes a fee in case you use a credit card – that seems protectionist to me, and surely illegal if we revisited it? However, in some areas the discount is, in effect, alive and well. If I pay my council tax by Credit Card they charge me 2%; if I pay by debit card there is no charge. The same with Road fund Licence and some other organisations. OK, in these cases it is a surcharge rather than a discount, but either way money is saved, which is all that matters. The lobby didn’t get here? Or am I wrong in my analysis?

As well as Card charges, most banks seem to charge businesses to put cash into their account and also for taking cash out. If some Credit Card Issuers give say a 2% cashback to some customers, they may charge the business over 2%. It only seems fair for the business to ask for 2% extra, to the detriment of the Card Holdres who do not get the 2% rebate.
Do we really want to be having multiple cards and Bank Accounts to save a penny here and there.

Banks exist for the benefit of their shareholders, not their customers. They’re not in it out of the kindness of their hearts, Their function is to squeeze you for as much as they can get without prompting you to up sticks and leave. That’s how capitalism works; the only way you can get it to behave responsibly is through regulation. No much chance of that in any meaningful way with the current business obsessed political establishment.

Banks exist for the benefit of shareholders by providing a service for their customers in many fields. The fact that there is an outcry when the last bank in an area closes demonstrates that many consumers feel they provide a benefit.

In the past, banks were (and some still are) free for private consumers, but you paid to deposit business cheques even if you were a sole trader working from home.

I run two current accounts (one free and one charged for) and move money between them depending on competitiveness with regard to charges and the interest offered.

I don’t see that the fees for a regular unauthorised overdraft should be used by Which? as a criterion for choosing a bank as it amounts to a dishonest transaction. As I have said before, in my view it is using money the bank has not agreed to let you have. Stick with legitimate uses of a bank account when comparing costs.

I’m not sure if it is a dishonest transaction if banks are happy to provide the facility, which judging by the interest rates for unauthorised overdrafts must be lucrative and presumably cover the costs of unrecovered debts.

I do agree that fees for unauthorised overdrafts are not a good criterion to judge banks by, but others might disagree.

I understand your point wavechange. I just think that as banks offer authorised overdrafts to all who they consider creditworthy, then it is easy to set up a legitimate facility. If you don’t then it may be because the bank would not consider you a suitable risk; that is when deliberately taking out more than you have is less than honest. I would exclude those who inadvertently slip into the red, but very rarely.
I find the acceptance by Which? of “a regular user of unauthorised overdrafts” very uncomfortable, to say the least.

We are in a minority wanting to pay only for what we actually use.
Banking isnt alone in this packaged approach, subscription TV packages, Insurance policies, £10 meal deals in supermarkets and even fibre broadband is cheaper if you take a package with your phoneline.
This approach is obviously a very successful business model otherwise companies would not use it.

Not quite. Get everyone in work actually creating or adding real value rather than pushing paper for a percentage.

Maybe one (satirical) answer is a BAT – Bureaucracy Added Tax instead of VAT on everything. That way BATty schemes to take money are discouraged, whereas real value creation is rewarded with well earned pay.

Difficult in the detail certainly, but certainly something worth aiming for.

Thanks Patrick. The comment reflects the optimism officially expressed in the original discussion. The concern then, as perhaps now, is that the statement “we’re hopeful that it can be done in a way that will ensure people’s security is appropriately protected” would be much more reassuring if “we’re hopeful that it can” had been replaced by “it will”. Sorry to be a sceptic, but we’ve seen government software schemes fail through function and security before, despite them being “hopeful”.