growse.com

I write things here.

I'm on Keybase.

Why banks will always win

I am reliably informed by my various news sources that something radical just happened - a man took a bank to court and lost. Now, this might not seem radical at first, but given the recent hysterical wave of people trying to claw back “illegal” charges made of the past 6 years, along with the fact that the bank in question didn’t turn up with armies of lawyers but instead sent a single letter in their defence, you might start to think that something about this is a bit of an eyebrow-raiser.

Now, whilst many people would instinctively sigh and chalk up another victory for those greedy Shylock-like corporations who’ll lend you money but suck your life out of you in return, I for one am applauding this decision. I would suggest that if you’re able to do simple maths, you should consider what this actually means.

Firstly, I need to make one thing clear. No-one likes bank charges. No-one. However, here’s the bit that no-one seems to take notice of. No-one is unaware of bank charges. “I didn’t know it would happen” is probably the flimsiest excuse to give when the bank charges you £40 for bouncing a direct debit, simply because it was written down on documentation they gave you when you opened the account and the fact that recent publicity about charges hasn’t exactly been small. However, some court, somewhere, recently ruled that it was possible that charging a penalty in a contract that’s above and beyond the costs incurred is illegal.

The floodgates opened as the man in the street suddenly learned how he could make a few quick quid out of the evil banks.

Everyone, bizarrely, took this to read that the bank had absolutely no right to charge you for anything, at all, ever. And to prove it, they went about “writing letters”, “threatening” the banks with court action if they didn’t get back the £2,450 worth of charges they’d incurred in the past 6 years. Wait a minute, two-and-a-half grand? I’m sorry, but I’ve lived through widely varying financial circumstances, from cripplingly poor to slightly more comfortable, and I completely fail to comprehend the lack of grip someone must have on finance (basic sums at the end of the day) to incur that level of charging. Now, I’m sure the banks-are-evil brigade will beat me round the head to tell me that first they charge you for bouncing the direct debit and then they charge you because you’re now borrowing what you shouldn’t be and then they charge you when you try to make a transaction in this state and then they charge you zzzzzzzzz… The simple fact is, if you had enough money to honour the transaction in the first place, it wouldn’t have happened. Of course, sometimes banks make mistakes. It’s happened to me. I seem to recall sorting it out by going to see them and had the whole thing resolved pretty much instantly. Why other people with thousands of pounds worth of charges didn’t do this, I don’t quite know. Maybe they were hung over.

Now, let me get to the point of this ramble. Banks are big companies and not, surprisingly to some, charities. They are a business and they have to make money. Most banks make most of their money in the corporate and investment markets. If you don’t know what that means, it means not you. If I remember correctly, 21% of one large high-street bank’s revenue came from the high street, which means a whopping 79% didn’t. Of the revenue gained from the consumer sector, I seem to recall that most of it was unsurprisingly from things like mortgages and insurance. Here’s another fact to throw out there - that random court ruling that the level of bank charges are illegal ruled just that - it’s the level of charges, not their existence. Assuming a precedent gets set against £40 charges, they’ll still charge you something like £12.50 for going 1p over your overdraft limit. Guess what: £12.50 might not compound as quickly, but it’ll still build up and leave you with thousands of pounds worth of charges if you happen to subscribe to the moronic banking worldview.

But here’s what bothers me most. Banks like to make a profit. Show me a business who doesn’t. If a small percentage of their customers manage to set a legal precedent which basically means they’ll make a smaller profit, I somehow don’t think the banks will just kick back and enjoy a slightly cheaper champagne for evermore. It seems far more likely that they recoup that profit in other areas, notably lower interest rates on savings accounts, higher interest on loans and mortgages and (shock horror!) charging service fees on current accounts. Notice how the above list affects pretty much everyone and the number of people moaning about charges are a small minority. Myself, I’ve incurred charges before - who hasn’t? I wasn’t keeping a close enough eye one what was actually coming in and going out and I got charged. On quite a few occasions in the past. It hurt and I felt grumpy every time it happened. However, the charge worked in it’s most effective role as a deterrent. I do my best to be financially responsible. Had the bank never charged me, I’d be a lot worse off today.

What I’m trying to say to the lovely, self-righteous, the-world-owes-me- everything people who feel that everything in life should come with cashback is that by pursuing this agenda to make the banks pay is basically going to make me worse off. If the banks give you your money back, they’ll just take it off me to fund it. I worked hard for it, and don’t see what I should give it, albeit indirectly, to someone who has a few parties they can’t afford and then writes a letter. To the rest of the world who actually knows how to use a bank and, well, money, here’s my battle cry - lets petition banks to increase their charges. Who’d go overdrawn if you got charged £200 every time? Furthermore, the morons who do manage to spend money they haven’t got could fund free mortgages for everyone. Ok, maybe the maths doesn’t quite work on that one, but it’s worth a try.