I don’t know if it’s the same in the US as it is over here but the blight of our financial lives is the ubiquitous bank charge.
The most grossly stupid invention of all time. Penalising the already poor when they go overdrawn. And not just by charging them interest on the amount of the deficit but whacking in a £22 bill when they exceed their limit by just a few pence. And then doing it again a week or so later if they still haven’t managed to get back to the right side of the limit.
How on earth is that meant to help anyone? I appreciate that people who go overdrawn can often necessitate additional charges on those of us who stay in credit and the banks are currently indulging in stealth techniques to move away from free banking altogether.
Most accounts these days require you to pay a monthly fee in return for benefits like free travel insurance, free roadside assistance, free mobile phone insurance, free 24 hour emergency home cover. And these can be quite good value if you compare what you would have paid as an annual charge for these services to the amount that you’re paying every month for the bank account.
However, you do need to check out the small print, especially if you are an older customer, as the travel insurance that they can provide for free may well not cover you if you have any age-related conditions, like blood pressure, diabetes or heart problems.
But, back to the bank charges. How can the banks justify whacking these over the top financial penalties on people who have exceeded their current overdraft limit by a few quid? Especially when it’s a matter of days before the situation is rectified. In many cases, it is just a mistake because the money going in has been delayed by a few hours due to the banks seemingly being unable to transfer cash from one branch to another immediately. I fail to see how it can take a few days for money to go in but they can take money out straightaway!
I had cause to take issue with a bank recently who wanted to cite ‘the bank holiday’ as the reason why my direct debit had not been taken on the agreed day that month. As I ranted to them in my carefully crafted letter of complaint, ‘in these computer-controlled days, the bank holiday is a completely prehistoric and ridiculous excuse because the computers don’t take them’. Needless to say, as a customer of over three decades standing, they did refund the charge they had made – but only as a gesture of goodwill. There was no admission of liability or fault on their part and I have had to ensure that all my other direct debits go out in the middle of the month so there can be no future repetition of clashing with a bank holiday.
There has been an on-going court case here over the legality of banks making these outrageous charges but, as usual, the bodies (our Office of Fair Trading) that have been set up to protect the consumer do not have enough teeth to control the big boys and in November 2009, the Supreme Court dealt the man on the street a huge blow.
In a case between the OFT and seven banks and one building society, the Court ruled that the terms of the Unfair Terms in Consumer Contracts Regulations 1999 meant that the charges for unauthorised borrowing were part of the price customers paid for banking and that the OFT did not have the power to judge whether they were fair or not.
This means that, in future, banks are unlikely to repay the fees charged on unauthorised overdrafts unless a customer is suffering particular financial hardship. It was a tough call for the many customers who are trying to reclaim thousands of pounds worth of these charges.
However, Martin Lewis, the Money Saving Expert has a guide on the best courses of action and how to define ‘financial hardship’.
So, if you’ve opened one of those horrible letters this morning and are wondering how on earth you are going to find the money to pay a fixed penalty on top of the regular monthly account charge and overdraft interest and still put food on the table this week, read the article on financial hardship definition and try giving your bank a call.
Although, you might get the reply that a friend of mine got recently when he explained that his benefits cheque was due to go in, but possibly not before the second lot of ‘overdrawn on the overdraft’ charges would be taken. He was asking if a note could be put on his account to stop the second lot of £22. The lady at the ‘Help Centre’ asked him:
‘Haven’t you got a friend who can lend you the money so that you can pay some into the account before your benefits cheque goes in?’
And this from a bank that received a huge bail out of public money only last year.
Unbelievable really.
What you describe about bank fees and practices is very similar here.
The banks here offer different types of accounts. For accounts with high minimum balances, monthly fees are waived, free checks, higher interest rates, overdraft protection, credit cards, and other perks are provided.
Thing is, the way the system is set up, they really do have us by the short and curlies if we want somewhere safe to keep our money and to try to get some form of return that will not endanger the capital. I just find it totally galling that, having bailed them out, they then try to claw back from the poorest members of society
I agree the overdraft charges seem excesive. My question is how is that you pay your employees $8.00 an hour and you charge $35.00 per check over draft????????? WTF? Did it take him 4 hrs to handle my heck? And how the fuck can you charge $35.00 on a damn check for $10.00?
But I also can see that the banks are in business to make money. You can have your checks cashed and use cash (I assume) so you really only need the bank for check cashing and not check writing. The bank provides you a service and when you use the service it costs you money, if you don’t follow the guidelines then they should be able to charge whatever fee they want provided the information of what the fee will be is readily available before hand. Shop it around not all banks charge the same fees. I know here in the US I don’t pay anything for having a checking or savings account. The only fee is when the bride writes a bad check. It is possible for a person here to NEVER pay the bank directly, if they never borrowed or never wrote a bad check. Hell you could actually MAKE money from the bank in interest if you didn’t borrow or overdraw. So it is a pretty good deal really.
Banks also are in the money lending business, now that is their main profit center, so when you write a bad check you are essentially borrowing their money because they make your check good when it actually is not. So if they didn’t charge a fee then people would really really take advantage of that.
I of course AM definately against the bail outs of anyone at anytime, be it a business or individual and I do believe that anyone taking bail-outs owes the taxpayer, plus interest.
If the banking there is based on capitalism and aren’t over regulated then they will compete for market share and will off things like free checking and savings and free checks and free overdraft protection and all. Capitalism is always always best for the little guy, and fewer regulations also are beneficial for the little guy.
I understand that they have to make money. I understand that exceeding your overdraft affects everyone but surely it should be charged as interest on a pro rata basis for the time and amount overdrawn. Whacking out charges of £22 every two weeks no matter how large the indiscretion is just far in excess of the crime, particularly when these people are already just scraping by.
I think I get even more offended because Ruf had a ‘business loan’ sorted out for him to get his company up and running. I imagined this would be at a beneficial rate since it was through a Government scheme set up to help mature graduates get back to work. I was staggered to discover that he was still paying the original 15% interest on this for two years after the Bank of England base rate had gone down to 0.5%. No banker wrote to him offering to reduce that interest rate! At the same time, he had a business account for which he paid a monthly fee PLUS additional fees when he was PAYING IN CASH! Or cheques!
And, trust me, Sage, nothing offered by the banks over here is ever free! Grrrr
Banks are capitalism at work. Institutionalized greed. Really great “for the little guy”.
I think I’m just going to start storing mine under the bed like my Gran did!
Thieves! All of them!
Ridiculous.
But to make you feel better, I have something for you …. swing on by!
Oh, an award for me? Thank you, I love pressies. And now I’m wiping away a tear. Bless you Blaze x
Well then, your lucky day (http;//gatorfeedingtips.blogspot.com/) Finished this morning (and no sharks in my dreams last night!) and you were awarded the “You’re Going Places Baby, Humphrey Bogart Award!
YAY!
Now, about those banks…
We had a bank over here that just made change. Two fives for a ten spot. Five dimes for a fifty cent piece. That sort of affair.
I asked them once, since they didn’t charge for the service…”How do you guys make money?”
and they said, “volume,”
Nah…
I’m with ya on your rant. I asked my girlfriend a couple of questions and discovered she had let the balance dip below the “free” point (free banking with a balance of x) and it turned out she was paying the bank to take her money.
They were charging her about five bucks (3.25 pounds) a month for having the account and paying her 11 cents interest.
Banks…is it any wonder they fold up so easily?
Oh, you’ve touched on my sensitive spot with this post. Thanks to HSBC, we coughed up thousands of pounds in bank charges over three/four years. It all started when money wasn’t hitting the account on time (debtors taking longer to pay invoices), and then a direct debit would have to be reversed. Even if the money was paid in ON THE SAME DAY, it didn’t matter – they would bounce the DD, and whack on the charge. Debits would always clear before credits, even if you paid cash into your own account in your own branch!!!
So, the bank wouldn’t let you go overdrawn on the DD/s, but they were quite happy to make you go overdrawn after they helped themselves to their charges. So, the next month, when you didn’t have the money to cover that £100+ charge (you were charged much more if you exceeded your overdraft), you’d end up in the same situation, and the amount of the charges just went up and up and up.
We no longer bank with HSBC, (and sadly we no longer run a business), and I am now quite happy to have an account where I pay £7 a month for those little “freebies”. I have no overdraft, and I will never deal with HSBC ever again. It meant nothing to them that we had been loyal customers for years – and for me it all went tits-up when the banks became “call centre” based in India, where you were talking to someone who didn’t know your name properly, and would ask you questions your branch manager would never dare to ask!! I can totally believe that question you gave as an example of your friend’s bad experience, because I was frequently asked, at 9.30 in the evening if there wasn’t some way I could clear a balance when I had just told the caller I was only expecting to receive money later in the week.
Sorry for the rant – this has been brewing since 2008!!!
Feel free, that’s why I posted… to get the iniquity of it off my chest! :)
I think it’s incredible that the government can expect us to bail out these banks and institutions with billions of tax payer money, yet they can’t do the decent thing and call it quits on excessive and damaging overdraft fees. We kept these people afloat, yet they still have no respect for us or any qualms at charging £30 everytime we slip over. There’s got to be a bit of give and take, it’s only fair.
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Hi Rick! Yep, it’s official, merchant bankers really is cockney rhyming slang :P
Lol Joanna I completely agree x
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