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Reducing Bank Charges

By Paul Michael
15th December, 2009


Many banks failed themselves and their customers. However, the banks are the survivors. Their business ethics made nonsense of the business world, but the failed banks are still here. They were bailed out by British tax payers because the government believed that this would be more appropriate for the good of the country than to let them crumble. This maybe so. Banks have significant interests in British organisations and allowing them to crumble could have shaken the very foundations of many UK businesses. They might have taken too many casualties, compromising our overall economy.
The banks have been saved, but now, they are not just the cautious banks that they should have been, but incredibly over-cautious to the point that they are of little help to the businesses they were saved for. Many businesses, especially small businesses, have complained that the banks won’t lend to them and that the banks are even calling in long-standing overdrafts. This is the life-blood for many firms.
While all of this has been happening, there has been a long-standing issue running parallel for personal and business bankers, who believe that banks have been excessive in their charges for unauthorised overdrafts and some other banking services. This came to a blow in the last few weeks when it was decided by a court that banks can indeed charge high fees as they see fit.
To add insult to all of our injuries, the news is full of stories about banks wanting to pay ridiculously high bonuses to their key people. It is outrageous. Alistair Darling to the rescue: he will impose a 50% tax on all such bonuses if the level goes over £25,000. Even so, we are furious that banks would even think to pay bonuses to those key people that have actually failed both the banks and their customers.
It is so frustrating that banks can do all that they have done and we can do little about it. Many people have withdrawn from using banks, but many of us simply can’t do without them. The way we live our lives has such an emphasis on electronic banking and on the convenience of carrying plastic instead of cash. To cancel our accounts would be biting our noses off to spite our faces.
So, is there anything we can do?
There is no direct action that would make bank managers stand to attention every time a customer so much as walked into their premises. If only! However, there are ways that we could help ourselves and, in doing so, reduce our reliance on the banks.

Personal Banking

For personal banking, we could transfer away from the banks that are run for shareholders, and move to a building society, as run for its members – its customers. The Nationwide building society is perhaps the biggest in the UK and has a current account with a debit card, along with various savings accounts. It offers online banking and all the usual services that banks provide. Although Nationwide will charge for unauthorised overdrafts and other services, their charges appear more favourable and reasonable than for banks.
Employees could ask their employers to pay them in cash, or part cash, part BACS. Many employers will be reluctant to do this, as it would cause them a significant burden. However, there are many types of business for which it will suit their own purpose. A shop, for example, is charged by the bank to deposit cash into its bank. It could forgo those charges and pay its employees by cash.

Business Banking

For businesses, it is about reducing the level of exposure to bank charges. Be smart with payments to utilise online payment technologies that are often free of bank charges. Also, instead of banking cash, which is what banks insist that businesses really should do – and then charge for handling cash - hang onto it. Use cash, where possible, to pay suppliers, sundries and, as already suggested, wages/salaries.
There are some banks that charge a base monthly fee for businesses, which may be more beneficial than paying transactional-based fees. The Abbey, by way of another example, allows a threshold that might suit many small businesses. For instance, it will allow £3,000 of cash handling in a month for free, after which it charges rates similar to other banks. It is worth shopping around.
Another ploy might be to simply look at what banks best meet your ideals. Look for banks that reward all of its workers in a rational and reasonable fashion rather than banks that reward just a few key people excessively. Go to online comparison websites to determine how one bank’s charges compare with another’s.
Beware of the small print. Many banks will draw customers in with their marketing tactics. However, once in, many banks find lots of ways of stinging their customers to generate their fat-cat profits.

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