h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

http://news.bbc.co.uk/1/hi/business/6169539.stm


Does anyone else find this interesting? I personally find it outrageous how banks charge customers and I feel that it disproportionately affects the poor.

How can an failed direct debit really cost a bank £30? Surely the entire process is automated, even the letter? It is the worst case of ripping people off for fat cat profits.

What do people think?

Just wait. Some sanctimonious twit will be along any minute to say "If they banked within their means, they wouldn't go overdrawn. Why should others finance someones fiscal irresponsibility. Blah blah blah"

I agree, this hits people who live on the limit disproportionately. The amount of the charge is excessive and the whole process has become a profit centre for the banks, instead of exacting a charge to cover reasonable costs.

You and me agreeing SWL! Who would have thought it!

I used to be someone who was in trouble all the time, funnily enough now I earn a bit more I rarely get into trouble with the bank.

Thesae things always hit the poor more. If you only have £100 a month to spend after all bills and rent then the chances of you inadvertantly going over the limit are obviously loads greater than someone with 5 or 6 hundred a month disposable.

This was debated recently. The industry regulators have been pressurising the banks to lower the charges.

Currently they make around £4bn a year from excess charges.

They are going to lower excess charges by 50%, leading to lower profits of around £2bn.

*But* they plan to introduce charges for all bank services, even if customers are in the black. They predict profits of £2bn from this move.

End result, the banks still make around £4bn a year from charges.

I think its pretty obvious that the banks are using these sorts of charges, like extortionate charges for just sending out a letter, and 'administration costs' for when your overdrawn/failed to meet a DD etc., as a source of income which I'd ahve thought the regulators by now would have really tightened up on these but they don't seem to want to, despite the periodical commenting on such things, and drawing up new 'guidelines', the bankds seem to toddle along as they please on such things... The best way of avoiding em I've found is to not use a bank but be with one of the few remaining decent building societies who're generally heck of a lot better on not ripping off customers at every concivable point possible... Its not only the 'porr' who are most particularly affected by such charges, but also the self employed/free lance workers, who often don't have regular money entering the bank at known predictable times, even though the balcnes can be pretty healthy for most of the time i in such cases, often they'll be intermitantly low when moneys are waiting to come in ETC...

"If they banked within their means, they wouldn't go overdrawn. Why should others finance someones fiscal irresponsibility. Blah blah blah"



Sorry, but that is my stance on it. But this isn't be being a sanctimonious twit, rather that I learned (and sometimes am still learning) my lesson about banking withing my means the hard way. It's not a pleasant feeling to still be overdrawn by three figures *after* you've been paid.

Many, many moons ago I was a newly qualified engineer earning around £8K a year and had just bought my first house. I was permanently skint and really struggled to balance my budget. Occasional things (like annual grounds maintenance charges) really left me strapped. The banks refused overdrafts, credit cards and any additional form of lending because they already considered me 'over-borrowed'. The £15 letter fees and £25 unauthorised overdraft fees left me fuming and only made the situation worse, but I wasn't prepared to go cap in hand to family or friends and ask for help.

That pride cost me an absolute fortune in the early years, but I worked hard and eventually became quite successful. Even in business, I found their arrangement fees and charges utterly unreasonable, but I soon learnt ways of avoiding them and negotiating fee-free services. Unfortunately, for this to happen, you have to *have* money.

I have an absolute loathing for the banks and I will do anything to avoid paying them a single penny. I have multiple bank accounts and credit cards and use them all for specific defined purposes. My strategy is carefully tailored to cost *them* money, rather than me. It takes a bit of work and you have to be ahead of the game, but it can be done. I've even paid one credit card bill this month with a free overdraft.

I hate the banks two-faced approach. When you need a hand, you get utterly ripped off and shafted. When you have plenty to spare, they can't wait to offer you a cup of coffee and a friendly chat about your investments.

What you do have to realise is that the banks only have one sole aim - that's to make as much money from as many people as possible. They call it business and often quote the free market. In reality, they are almost unstoppable monopolies. Forcing them to repay a few billion in unfair charges won't stop them - they'll simply find another way of exploiting their customers.

The thing is all to often it is the bank charges them,sleves that beed more bank charges.

Being a union rep in the 21st centuary means you are as much a financial counsellor as you are a shop steward and I help people go through their finances all the time. On lots of occaisons I find people are oging over their limits by less than the bank charges the previous month, and get charged again the next month. Evewn though without the charges they would have been fine.

Some banks are fine and will help people, so often when I phone banks on behalf of my people they are willing to make changes, but often they are totally unreasonable.

Whatever people say these things will always affect the poor more and trhat is not fair.

When applying for a bank loan, the first thing you have to prove is that you don't need it. Or so it seems sometimes.

The argument shouldn't be about whether a bank should charge customers for going overdrawn, it should be that the scale of charges should be reasonable, fair and indicative of the actual costs involved.

Living within your means is really easy when you have a regular income. My job, however, means that some weeks I am working less than 20 hours a week ocassionaly and then that can increase to 40 hours on other occasions. It's not always easy to gauge how much I will earn in a month and therefore pretty difficult to 'budget'. Yes, I could change my job, but the one I have I rather enjoy and it's so darned convenient.

I have paid my bank several charges over the past few years and probably will again, I just wish they were more in line with 'actual' cost. Does it really cost the bank £35, when I go overdraft limit by less than £5.00 for a day? I think not.

Well, that's the nature of private enterprise - those who are already well off find everything very easy for them, and those who are poor get repeatedly ripped off. Another example here:

http://news.bbc.co.uk/1/hi/northern_ireland/6189818.stm

"The Water Service - part of the Department of Regional Development - has appointed a private organisation, Crystal Alliance, to handle customer billing and debt recovery.

...

"Householders deemed as "high risk" - those with a bad credit rating, for example - will receive reminder notices 14 days after getting their water bill.

"Customers who are thought to be "low risk", on the other hand, will not get that reminder until 28 days have passed."

Our (by which I mean the government's) love of the private sector means that this sort of thing will happen more and more in future.

When people go overdrawn it is usually one of two reasons: switch/maestro transactions and direct debits/standing orders.

Switch/Maestro are the worst because companies have up to 28 days to claim the money. So, pay day comes along and you do your weekly shopping. Three weeks later the shop in question bother to put their sales through and bam- you're out of pocket. With a Switch you have promised to make that payment, so even if there are insufficient funds the money will still leave your account.

A lot of people that come into my bank simply don't realise that a Switch is not an instantaneous transaction so fail to keep an eye on it. In this case it's a lack of knowledge of how the banking system works. In the first instance we usually refund the initial charge.

With some exceptions I would say that the majority of those who go overdrawn don't understand the system, rather than being 'poor' or bad with their money. We get very few people who consistently go overdrawn, and those that do we try to help and see what we can do (freezing the account if the charges are piling up and we can't contact the customer). It might mean that they can't have a Switch card, but if it means that they have no way of going overdrawn it's going to save them a lot of money in the long run.

Maybe some banks charge high rates, but accounts in arrears can cause quite a bit of work- that's both man hours and paperwork. You may think that all banking is computerised now, but you'd be suprised. It's a long way from being paperless. Perhaps, now more and more is being done to cut down, there will be a time for the charges to come down accordingly, but I certainly doubt that they will ever disappear.

WHAT!?!?!?!?

28 days for switch?

Why on earth is that? Surely it should be instantaneuos, what possible reason could there be for it taking several days?

When the Switch terminal contacts the bank, I *think* all it asks is that there are sufficient funds in account number x to cover the bill. Until the bank actually receive the paperwork proving that the bill is genuine, they won't give out your money.

Some companies, especially small ones with few transactions, will only take the paperwork down to the bank, say, once a week. Tesco, on the other hand will get so many that it will always do it daily.

These days is it much rarer for it to take that long, but is is always a possibility.

That is crazy.

Surely it owuld be more sensible for the transactionsa to happen automatically?

I paid a credit card bill by accident from the wrong bank account. I caught the mistake before the payment went through however. No problem, right? Wrong. Credit card company said there was nothing they could once it was set in motion. Also failed to mention that they would repeatedly charge my bank account until the payment went through -resulting in multiple overdraft charges from the bank and bounced payment charges from the credit card. Brilliant system.

It also doesn't help when you order something from amazon and they then cannot deliver it for 3 weeks and don't take the payment until delivery is imminant

Payment for groceries etc where the payment is authorised through a checkout, however, means that the monies have been 'reserved' so that you cannot withdraw them at an ATM. (This does, of course, fall down whan a standing order or DD leaves the account the day of - or before - the authorised funds have left the account)

If that makes sense

Transactions and the inherent delay in processing them has long been a concern for many people stuck with the inflexible UK 'retail' banking system. UK banks, in my opinion, operate with contempt for retail customers brought about by their constant obsession with 'market share'. They collectively brought the situation on themselves in the 70's by beginning to offer consumer accounts for free. Ever since then, they've been chasing their own tails along with their competitors in order to maintain or improve their standing. It never made them profitable, so over the years all manner of schemes have been devised to claw back the cost of providing these services to the average consumer. Most are based upon deception, relying upon consumer ignorance and misplaced loyalty among older individuals. In each and every case, my experience has been that the retail customer gets far less than he deserves because of the 'free' system.

Please note that I only comment on my experience of UK based banks and more recently my experience with Portuguese.

The two are worlds apart. Considering that the UK is one of the richest nations on the planet and that it heads a fairly powerful monetary system, you'd think that the systems in place for the average banking consumer would be way above those for a relatively poor country with a far smaller population.

Not so.

For reasons that suit me, most of my money is held in UK banks. I don't particularly mind that the UK continue to operate the Pound (indeed I was all for it a number of years ago) but I do mind the way UK banks take advantage of their retail customers in transaction and commission charges for foreign withdrawals. They are applied purely for profit along with an attitude that 'they'll pay - they are on holiday'.

As an example, I use a UK based building society to make Euro cash withdrawals in Portugal. It's a mutual society, acting for its members, and it charges the exchange rate of the day. An €200 UK debit card withdrawal today cost £134.88 The same sum taken by my partner on our Portuguese € account cost £138.64 at the same time. The same sum taken via a UK 'bank' debit card would have cost approximately £142.50 when fees and charges were applied. It doesn't take a lot of understanding to work out where the difference is going.

Now, here's the rub. The funds went from the Portuguese account immediately, balance reduced accordingly. The UK building society showed an account balance of £500 and an 'available' balance of £361.36 The UK bank account would have been processed somewhere between 3 and 5 days later along with the charges had I made the withdrawal.

Why does my UK bank do it? Quite simply because it makes them money. Cynically I think they leave it floating for a day or two to see if they can apply a preferable exchange rate in their benefit. More likely, they'll argue that the time is needed to protect the consumer against fraud and investigate the transaction. The UK building society meanwhile knows of the transaction, has more or less debited it, while the Portuguese account has accepted it as a done deal.

The difference? Every customer in Portugal pays to bank. (It costs me €10 a month). The mutual building society doesn't have shareholders and the market to satisfy, so it works for its members. The UK bank wants my money, however they can get it. They have targets to reach.

Thinking about my rather harsh "sanctimonious twit" comment and Mr D's response.

Why should the poorest pay exorbitant charges to fund free banking for the better off?

Banks?

Here's a couple of horror stories from Australia:

I worked for a small company who banked a $2000 cheque on their overdraft account. The bank lost the cheque!! Overdraft was accruing interest whie the bank looked for the cheque which eventually turned up 2 months later in some teller's drawer. The company had to jump up and down and wrote numerous letters and eventually were reimbursed, but what if that had happened to someone who needed those funds for day to day expenses and didn't have the guts to keep at the bank ......

Another guy I worked for had 2 cheques stolen from the back of his cheque book - he didn't notice and the bank paid out over $5,000 from his account even though the signature was obviously not his. They had to pay it back, but the merchant who accepted the cheques was still out of pocket.

I have had banks dishonour wages cheques from companies I worked for even though there was heaps of money in the account because someone punched in the wrong account code when the bank processed the cheque. The poor recipients of the cheques had to wait for the bank to sort it all out - and they had the hide to charge the drawer (us) AND the depositer. It was (again) all sorted and it was all refunded but the poor workers had to wait ages for their money.

I have more but it's making me mad just thinking about it!!

Banks are WORSE than brothels ... they charge you to put it in, they charge you to take it out and they charge you to move it around - and in the end you are ed. At least in a brothel you are only charged to put it in - and you are the one doing the ing.