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Free banking to be axed, warns leading bank

Discussion in 'General Discussion' started by crashuk, 31 Jul 2006.

  1. crashuk


    Joined: 7 Dec 2005

    Posts: 2,691

  2. growse


    Joined: 18 Oct 2002

    Posts: 7,139

    Location: Ironing

    I hate it when people roll out the "huge profits/fat cats" line. HSBC is a bank, and consumer banking is only a division within the business. It claims (and I can believe it) that 80% of its profits come from investment or commercial banking. Consumer banking, as a business, has to be profitable as well, and serves no purpose if it just loses money. The bank would survive quite happily without a consumer arm - many US investment banks make huge profits on investment banking alone.

    So, if you take a business division, deprive it (legally or not) of a revenue stream, you're nuts if you think it's not going to try to find an alternative source. If it didn't, and succumbed to every attempt by the customer to make it ditch it's revenue, that division would cease to operate at a profit and would have no reason for existing within the company.

    You want to bank on the high street? Either everyone pays, or the people who break the rules pay. Banks don't make their 'excessive' profits from you, they make it from trading with other banks.
  3. Kitchster_uk


    Joined: 18 Oct 2002

    Posts: 5,058

    Location: The remittance desk

    Good. I have predicted it in all the tripe "lolz I beat the bankz n got bak meh chargeez w00t!!!!!111one" threads and lo and behold, Good old Dufrig comes out with it. Three VERY important paragraphs in that sensationalist tripe from the daily mail are as follows.

  4. 36:)

    Wise Guy

    Joined: 18 Oct 2002

    Posts: 1,335

    Location: =)

    I already had the interest on my ISA/Current account slashed last week... as well as the interest on my credit card sky rocket..

    Great now I have to pay fees as well because some people can't order their finances well.
  5. BurningHorizons

    Wise Guy

    Joined: 20 Oct 2002

    Posts: 1,873

    Location: Pateley Bridge

    Natwest / RBS already do this with a 3/4 tier system.

    Current Plus - Free
    Advantage Gold - £12/month
    Advantage Premier - £18.50/month

    Interest Paying Current Account - Free
    Royalties - £6/month
    Royalties Gold - £12/month
    Royalties Premier - £15/month

    Personally, I don't mind paying for banking as long as you get good service, which I always have done with RBS.

  6. Geffen

    Wise Guy

    Joined: 28 Dec 2002

    Posts: 1,005

    No Bank is going to charge fees on current accounts in the UK. While it is not where the banks make the bulk of the their profits they do make a sizeable profit from it. The bank i work for only makes about a eighth of it's profits from the uk consumer market but that still £500,000,000 a year.
  7. HangTime

    Man of Honour

    Joined: 25 Oct 2002

    Posts: 28,606

    Location: Hampshire

    A fair point. Those who were quick to praise the slashing of late payment charges etc may not be smiling quite so much when they realise that diligent customers could now end up subsidising the careless ones.

    Fortunately, I don't think it will become a wholesale change as there will be too much competition from banks offering 'free' accounts.
  8. Dolph

    Man of Honour

    Joined: 17 Oct 2002

    Posts: 49,303

    Location: Plymouth

    Yay, just what I wanted!!!!

    Oh wait, no it wasn't...

    It was just what we said would happen though, now everyone will be hit with unavoidable charges... whoooo!
  9. Lagmeister


    Joined: 17 Nov 2005

    Posts: 931

    Well they charge quarterly for bank services here in austria, ita bout 15 euros a quarter so I hardly notice it, but my money is secured by the governent so if the bank dies, I get it back still, or so I have been told
  10. VIRII


    Joined: 24 Jul 2003

    Posts: 30,259

    I very much doubt that there will be no free banking available to people as a result of cutting charges for sending out letters. Sounds like scare mongering to me and if places do try to charge everyone a monthly fee places like Sainsburys will take advantage and increase their banking share.

    For the record I do pay a monthly fee for my banking and also think that £25 for going beyond an overdraft limit is ridiculous, especially as the charges can often be higher than the item they refused to clear.

    I wonder what percentage of the banks profits from personal banking were from bank charges, in other words how much revenue is this change in law actually costing them and is it a good business model to "bank" on making money from effectively fining your customer base on a regular basis ......
  11. growse


    Joined: 18 Oct 2002

    Posts: 7,139

    Location: Ironing

    This could turn into the ISP "unlimited" fiasco.

    If the law determines exactly how much the banks can charge for things, and the banking market deems this to be unprofitable, banks will start to charge for accounts. If you have a bank that doesn't, everyone will flock to them-> increased costs to the bank meaning they can no longer afford to give everyone a free account -> charging for accounts. Everyone waits until the next "free" bank shows up and runs to them....
  12. Berserker

    Man of Honour

    Joined: 4 Nov 2002

    Posts: 15,454

    Location: West Berkshire

    And Lloyds. I pay for my banking and don't mind doing so provided the charges are reasonable and justified. A lot of other countries have very limited or no free banking but they most certainly do compete for customers.

    Also, I have noticed pretty much the whole credit card industry upping rates, ditching perks, removing card facilities, and generally making the whole thing more expensive for everyone. They were doing this before the OFT ruling and they're still doing it. My personal opinion is that the OFT should read the riot act to the whole damn lot of them. :mad:
  13. ste_bla


    Joined: 9 Aug 2004

    Posts: 7,794

    Location: Milton Keynes

    Happens in other countries so why not

    Only thing is I hope we get better current rates if they intro fees otherwise its yet another way of making monies
  14. Kitchster_uk


    Joined: 18 Oct 2002

    Posts: 5,058

    Location: The remittance desk

    For the record, this isn't scare mongering.

    The UK banking system isn't fair because, currently, it's pretty much equal. Equal is not fair and fair is not equal. I envisage that those who merely use a bank for a bank account with all the lovely facilities (switch, cash in, cash out, cheques etc) and have their savings/mortgage with the building soc as well as their life, pensions and investments whilst maintaining their credit card with Cap One, taking their personal loan on-line etc - these are the ones who will be affected the most as they don't bring in any revenue.

    Commerical banking already works off an 'income' system and most relationship managers will cut better and better deals the more you have with them.

    If HSBC is making 93p per week, on avarage, from the 8 million personal customers it has, that is £387 million per year. The bank is expected to turn out £18+Billion. That equates to 0.021% of the total income of HSBC yet the infrastrucutre required is massive. 1200 branches countrywide, with 5 massive superstores planned as well as numerous other branches. Expansion into more of Scotland and Northern Ireland. Need I go on?

    I pay for our bank account plus, although it is heavily discounted (55% off) as I get the annual multi-trip travel insurance and it covers my finace's medical conditions - it's a bargain imho.

    ANyway, once charges are reduced, there will be more and more and more accounts with charges. Those who don't like it can have a Basic.
  15. Alasdair

    Wise Guy

    Joined: 16 Apr 2004

    Posts: 1,977

    Location: Edinburgh

    People look at banks as if they're some form of charity that exists solely to allow people to go into debt. Banks need to make profits, plain and simple.

    I can see charges for bank accounts becoming the norm soon enough, and coupled with this the non-specialist lenders will be more wary on what they lend and to whom. Bad debt levels are at record highs, insolvency is used by lazy people to get out of paying what they owe, and we're just going to stifle the retail banking markets through the poor lifestyle choices made by several customers.

    Personally, I think I'll be safe from charges as I work for a bank already, but I can see it having a negative impact on low average balance retail customers who keep their account in check (i.e. free of penalty charges) at present.
  16. HangTime

    Man of Honour

    Joined: 25 Oct 2002

    Posts: 28,606

    Location: Hampshire

    Indeed, when I was mentioning subsidising above the first thing which sprang to mind was my reasoning for ISP caps being a 'good thing', as they help to keep costs down by scaring away the heaviest users who lose the ISP money. Unmetered isps need higher monthly fees in order to subsidise all the heavy users.

    However, one key difference for me is that I don't think new customers will necessarily be as damaging to banks as they can be to ISPs. Basically, a customer who uses more than xGB of data will be costing an ISP money (or in dialup terms, more than y hours connected). There's a huge variation in cost-per-customer compared to banks, where I expect most customers generate very similar cost levels.

    Personally, the concept of having to pay a fee for a bank account is somewhat alien to me. In some ways, however, we are already paying for a (current) bank account given that the typical interest rate is lower than the rate of inflation, so any funds in there are not gaining value as rapidly as they would in a savings account or other form of investment.
  17. MrMoon


    Joined: 22 Dec 2002

    Posts: 1,596

    i pay £12.50 a month for my bank account plus with HSBC, it gives me a cheaper overdraft and cheaper loans, oh and credit card like debit card purchase protection and whole bunch of other carp that I dont use, but hey I dont mind, if I buy something in the shops with my switch card and find it cheaper within 30days I get the difference back from the bank
  18. Alex_L


    Joined: 18 Oct 2002

    Posts: 3,026

    I have to say i'm not suprised by this at all. Whilst I understood the legal position that customers used to claim back the so called 'excessive' charges, i never totally understood why they thought they should get them back, they broke the terms of the contracts and the penalties were well set out, but i guess thats a dicussion thats been had somewhere else.

    In the end it looks like the actions of a few bank customers (who can't managed their finances properly) could end up costing everyone else.

    I wouldn't mind paying for my banking, but i'd expect an improvement in service such as branches open later during the week, open all day on saturdays, faster cheque processing. Somehow i think we'll get charged, yet still get the same poor levels of service.
  19. NickK


    Joined: 13 Jan 2003

    Posts: 19,078

    So does your interest rate cover the annual cost of the charges? Otherwise it's costing you money to keep your money with that company - not a good business model!
  20. kibblerok


    Joined: 21 Nov 2002

    Posts: 5,011

    Location: Manchester

    or move banks...