A possible solution?

[indebtstudent]

I had a very strange idea appear in conversation today when putting my opinion on the subject of bank charges to a colleague. I confess I have no knowledge of the facts and figures invovled in the profitability of current accounts. I would think it is fair to say that current accounts are at best not a great source of revenue for the banks and make a loss where customer run thier accounts in credit.

The lady I was talking to was hard to convince because she was talking morality and I was talking legality BUT she did make a remarkably astute comment at the end (at least I thought so). Banks have recently been trying to alarm people saying free banking will have to go because of those reclaiming thier charges (which we would never have done if they hadn't been overcome by greed).

My colleague said "well I don't see why they don't just stop paying interest on current accounts altogether, that's not what they are for.".

Consider for a moment the purpose of a current account, it is as it sounds its for cash now, so what is the point of paiyng people interest? how much does the industry payout in interest to current account holders? I have absolutely no idea, but I certainly can't see the point in paying a fee (as some people now do) to get some special interest rate since it is not certain you would benefit from it.

Would I really care if I got no interest on my current account? Not really that's what savings accounts are for surely - didn't this used to be the case in the past?

Any thoughts? If someone else cmae up with this already, I have limited available time at the moment...

[Gez]

The amount of interest I have made on my current account in the last 10 years wouldn't amount to one single penalty charge..

[indebtstudent]

I was thinking more of the organisations that pay more than .10% interest.

I feel rather silly now! haha

[indebtstudent]

Ok so it was a stupid idea, I guess what I was getting at is why don't banks just take thier bat and ball home and not offer any overdraft facilities at all. Oh wait they make a profit from even authorized OD's. By jove I think I've got it (sarcasm).

[crazyworld]

Originally Posted by indebtstudent

I had a very strange idea appear in conversation today when putting my opinion on the subject of bank charges to a colleague. I confess I have no knowledge of the facts and figures invovled in the profitability of current accounts. I would think it is fair to say that current accounts are at best not a great source of revenue for the banks and make a loss where customer run thier accounts in credit.

The lady I was talking to was hard to convince because she was talking morality and I was talking legality BUT she did make a remarkably astute comment at the end (at least I thought so). Banks have recently been trying to alarm people saying free banking will have to go because of those reclaiming thier charges (which we would never have done if they hadn't been overcome by greed).

My colleague said "well I don't see why they don't just stop paying interest on current accounts altogether, that's not what they are for.".

Consider for a moment the purpose of a current account, it is as it sounds its for cash now, so what is the point of paiyng people interest? how much does the industry payout in interest to current account holders? I have absolutely no idea, but I certainly can't see the point in paying a fee (as some people now do) to get some special interest rate since it is not certain you would benefit from it.

Would I really care if I got no interest on my current account? Not really that's what savings accounts are for surely - didn't this used to be the case in the past?

Any thoughts? If someone else cmae up with this already, I have limited available time at the moment...

Hi indebtstudent, well personally I don't really care about having interest added to any credit balance in a current account, i've recently opened a basic bank account with the Halifax which won't allow me to go overdrawn, doesn't give interest on credit balances, and doesn't give me any cheque books. I'm personally quite happy with this arrangement.

I agree, I think that if I opened a savings account i'd expect interest to be applied in that case, more than i'd expect interest to be applied to any credit balance on a current account.

The amount of interest applied to current accounts for each individual may only be small, but when those amounts are added up surely they could add up to millions when we're talking about these big banks and building societies?

[bram stoker]

Actually all current accounts in credit are paid for by the customer depositing their money with the bank. The bank can use their money to obtain interest for themselves.

When I am in credit with the bank they make money from my funds. I refuse to pay them a penny for maintaining my account.

When I go over any overdraft limit I refuse to pay any more than the correct penalty charge for my breach of contract and not a penny more.

[JennyTeighleiagh]

Originally Posted by Gez

The amount of interest I have made on my current account in the last 10 years wouldn't amount to one single penalty charge..

That just about sums it all up - they make a big issue of earning interest on your current account, but the reality is that they are still ripping us off.

[bram stoker]

Originally Posted by JennyTeighleiagh

That just about sums it all up - they make a big issue of earning interest on your current account, but the reality is that they are still ripping us off.

I am quite happy for them to make money from my money in a current account. I don't view this aspect as a rip-off. For them to then charge me ontop of this would be unreasonable in my opinion.

[bally35]

Yes but The CompetitionCommission also made a big hooha about the main 4 banks in Northern Ireland paying little or no interest on current accounts.
When you are in overdraft they also charge you overdraft interest, whi is wherre they should be making their money from.
Current accounts do not need interests.Banks have realised that most of the younger generation are not in a position to save and as succh they tried to tantalise them with interest on the current account.
These accounts normally have very strict terms and conditions and their penalties are generally worse than normal non interest paying current accounts.

[indebtstudent]

Ok so I'm not a COMPLETE retard!

Do banks actually make money on current accounts (I genuinly don't know, I don't have access to that data)? I say this only because, theoretically, customers could withdraw money from thier current accounts on demand (I know there are daily limits etc).

[squarebob]

Hy indebtstudent,

Have you read paragraph 52 of the Market Investigation Into Personal Current Account Banking In Northern Ireland?

Maybe current accounts in themselves only make just a teensy profit for the banks, but what really puts the icing on the cake, is, 'Penalty Charges'.

Have a good Sunday, I'm off to the gym.

[indebtstudent]

I did start reading it but must've missed that bit (probably not a good idea to try to read such things in one sitting!)

[squarebob]

Originally Posted by indebtstudent

I did start reading it but must've missed that bit (probably not a good idea to try to read such things in one sitting!)

I quite agree with you there, only got around to reading it after it had spent a week on my desk, then I only read it as I had nothing left to read. Glad I did read it though as there were a lot of relevent bits and pieces regarding bank's policies etc.

Squarebob

[BADGER 69]

Banks have many ways of making a profit out of your deposits. For instance; banks will lend out your deposits to others several times over becaues they know that there is only a small percentage of poeple who will come in and demand their money back at any one time. It is Known as " The Multiplier effect". They also charge far more than they pay you.

I have several books on the practice of banking and I will look up and let you know some of their other ploys