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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 loss

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.

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.