Personal Account Charges and Penalties
Keep it personal
The banking industry goes through phases of being accused by various bodies and even Government institutions of profiteering and of taking advantage of its customers with high fee charging. We take a look at some of these fees and ask whether there is anything that can be done about them.
The dangerous overdraft
First on the list of hugely expensive actions that unsuspecting customers can fall prey to is all the fees associated with an unauthorised overdraft.
Interest on an overdraft will often be charged at something like 20% which is very high to start with, but when you go into an unauthorised situation you can usually add another 10% to 15% just for the interest and that is charged on a daily basis. Then there are the fees themselves. For every transaction while your account remains in an unauthorised situation you could be charged as much as £30. In addition you will get a one-off charge for daring to make your authorised overdraft, unauthorised.
There is no way it costs the bank this much. This has been found to be the case in court of law, these transactions actually cost the bank a fraction of that amount, and yet they insist on charging them.
Credit card companies recently had their knuckles wrapped about extortionate fees and their response was to rapidly back down or to cancel some of their fees if the customer contacts them to complain. Banks don’t seem quite as willing.
It’s a recognised fact, even within the industry, that people do actually find it difficult to keep track of how much money they have in their account – especially with several direct debits going out at different times of the month. So to penalise forgetful customers seems unfair in the extreme.
Chalk and Cheese
There are some banks who actually keep an eye on customers who are regularly close to their overdraft limits and will phone them with a warning if the bank perceives the customer might go over their limit. But this is only one particular bank and we suspect this helpful approach is not company policy.
One bank on the other hand, which shall remain nameless, doesn’t even tell its customers they are in an unauthorised situation until they get their statement at the end of the month. By which time the customer could have unwittingly clocked up hundreds of pounds of charges – all they need is four direct debits, charged at £30 each plus the £30 fee and say three other transactions such as card debits and you have a total of £240 in charges!
Increasingly banks are installing ATM’s that demand payment for use, those that charge £1.50 or even £5.00 per transaction are increasing in number and by the end of October 2006 in Britain the fee-charging ones are predicted to number more than those that are free.
With research indicating that the British public would be making 110 million withdrawals, that would be £140 million in charges going to the banks.
The banking industry has retaliated with the comment that it is not a case of the number of free machines being reduced, it’s that the number of fee-charging ones is increasing. They say that to have free ATM’s in all locations simply would not be viable, given the cost of the ATM and its installation. This is why, for example, at a petrol station you can expect to see a machine that will charge, whereas in a busy shopping centre where plenty of people will use the machine, it will be free.
Credit Card Comparison
The situation with banks and fees is rather similar to the credit card industry a few years ago. In 2003 Barclaycard made profits of £722 million. It reported then that a staggering 43% of its operating income was generated from fees and charges.
That’s why banks will continue to charge us so much; they can’t afford not to.