What we can all do about bad banks
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This is no time to be a bank manager. Not only are times getting tougher for your business (you don’t have as much money to lend out as you used to, nor as many people willing to borrow it as you once did), but the number of people who hate you is rising at speed.
Consider the front page of last Tuesday’s Independent. “Revealed”, it said, “a new bank rip off”, before going on to claim that while the UK’s banks had failed to pass on the benefit of rate cuts to mortgage holders, they’d been quick to use it as a pretext to slash payments to savers. “Heads they win. Tails you lose.”
At the same time, the backlash against bank charges (which all the banks are busily ratcheting up while they still can) continues. Folk band Oystar, egged on by Martin Lewis of Moneysavingexpert.com, has released a single called I fought the Lloyds and won about the battle to reclaim charges (it is already in the top 20) and next week a case bought by the Office of Fair Trading to establish the legality of bank charges reaches the High Courts. Most lawyers think the big banks will lose.
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But the worst thing for the banks is they really can’t put up much of a defence. Why? Because they do behave badly. Figures from Chase de Vere show that in the last month 18 banks and building societies have cut the rate on one or more of their savings accounts by more than the last rate cut (0.25%), while, says The Independent, 14 lenders have not reduced their standard variable rates (SVRs) by the full amount. And they do charge too much for minor infractions: according to Moneyfacts.co.uk, go £100 overdrawn at one of the high-street banks without arranging it first and it will end up costing you up to £160.
The kneejerk reaction is to call for more regulation. But rather than wait for this to come (and not work), we think we’d recommend vigilance. You don’t have to keep your savings with Alliance and Leicester or your mortgage with Egg. You also don’t need to have unauthorised overdrafts (at the kind of price they come in at, you might as well spend on your credit card instead). And it really isn’t hard to switch your current account to a bank that might act nicely (First Direct, perhaps).
The banking market should be very competitive – there are plenty of players trying to make money out of the same kinds of products. The only reason why so many banks so often get away with fleecing us is that we can’t be bothered to take the action to prevent them from doing so. So if you haven’t got a new year’s resolution yet, here’s one: start actively paying attention to your personal finances.
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