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UK bank accounts are nearly all free Which is great, except they make a load of their money from hefty overdraft charges (per the article), which means the poo

• iofj 11y ago
  Well when the banks lost the ability to invest due to QE, first in the US, then in Europe, the money to pay for providing bank accounts had to come from somewhere else. Frankly, this is explicit government policy. Hell, QE is so ridiculous. What it effectively does is that it gives government more control over the economy. The QE money guarantees the government money that "it has to pay back" but doesn't pay interest on. In other words, the government believes (and may be right) that this money never needs to be paid back, and this is what's subsidizing government spending at the moment. Effectively a tax on the monetary base instead of on other things like assets (tax the people who only have money to the benefit of those who own houses, stocks, bonds, ... that sort of thing. And this is done without explicitly charging them anything). Currently, every European is paying 120 euros monthly to subsidize banks and stock/bond prices. They are going to keep doing this "for 2 years" (after that, the theory is, governments are going to be offered more free money and say "no thank you, I've had enough". In other words, fat chance). By that time every European will have paid 3000 euros to push up stock prices, the vast majority does so without owning stock, so it's just a cost for them. (The US poor have paid 8333 per-person over the last 4 years to create the current bubble in stocks, house prices, bonds and so on. Currently they're not paying anymore. Note that the stock market is doing very badly. Expect the housing market to crash shortly) Now you might think that you haven't lost any money, and that's true, you've lost value. Those 8333 you paid over the last 4 years mostly went to funds with the purpose of making houses more expensive. Making stocks more expensive, and the like. So you haven't lost money ... well no, you haven't. You've lost part of the ability to buy houses, stocks, cars, bread, ... But don't worry ! The official statistics show no loss of purchasing power (they did take out gasoline, cars, houses, ... you see when those things got expensive, a lot of people stopped buying them. So "it doesn't make sense to have them in the consumption index anymore". Great, and might even be accurate, but let's not pretend this remains a useful metric to compare the wealth of the average American to 20 or even 10 years ago). And this is explicit government policy. It's not like the ministers and so on don't know this. The net effect is to let the government control slightly over 50% of economic activity, which wouldn't be sustainable otherwise. So they make sure the extra taxes are well-hidden.
• ptaipale 11y ago
  I wouldn't call it cross-subsidising. It is obvious that the costs to the bank are higher with customers who need to be followed up closely to avoid credit losses. Overdraft charges are a risk avoidance procedure to the banks; none of them are paid to rich customers. (Over here, Finland, overdrafting is not really possible; you need to make a loan agreement to be allowed a negative bank balance, and that is not offered if the credit rating is not clean. Is that better or worse for poor customers?)
  • onion2k 11y ago
    It is obvious that the costs to the bank are higher with customers who need to be followed up closely to avoid credit losses. Why is that obvious? The simple fact is, these days, there isn't any follow up. No one is 'followed up closely' in some expensive human-driven procedure. It's all automated. The cost of someone going overdrawn by £10 is pennies. It can't be expensive because most banks will give you a free overdraft if you ask. Sometimes even if you don't ask. I've had a £1500 overdraft facility on my bank since I opened a student account 18 years ago. Back then I used it a lot without any fees. Now I don't use it at all but it's still there. If that overdraft cost anything I wouldn't have it. The only time you get charged is if you haven't planned and set things up ahead of time. I don't believe for a second that updating a signed int in a database record saves the bank £25 per infringement, yet that's what they charge.
  • jerven 11y ago
    Much worse, overdrafts are a mean product! Especially in the UK variety. When I was an intern in the UK I once handed over a cheque a day before I got the cash. The cheque bounced, I was forced to pay 25 GBP in overdraft fees and the person who had the cheque still did not get their money. i.e. No one benefited except the bank, i.e. they did not provide any service what so ever yet still charged 25GBP for it. Overdraft fees like that are evil as they are very much a profit center on the poor. The Finish system of just not allowing the transaction is much much better.
  • justincormack 11y ago
    Charging £25 for a £1 overdraft is not to cover risks, it is just getting money out of poor people.