There's a debate to be had about "no such thing as free banking" - I'm very familiar with the world of prepay in the UK and retail banking practice is a big headwind here.
The big deal in the UK, a few years ago, was that a person would go overdrawn, deposit money to cover it immediately but then get charged an overdraft fee by an overnight process. This fee would put them overdrawn, leaving them liable for a second overdraft fee - which would be charged the next night...
This was ruled to be illegal and banks had to set up whole departments to process return claims. I suspect this is the main cause of the big headwind.
It was slightly more insidious than that - they were processing debits before credits, and charging a fee for insufficient funds if your balance dipped below zero (or below your overdraft limit) in the process:
Also, when you had a bunch of outgoing positions a day, they (used to?) ordered them from biggest to smallest, thus hitting you with the maximum number of overdrawn transactions.
They also charged a fee for standing orders that didn't go through because of limited funds in your account. Instead of just ignoring them.
They have to make money somewhere. If it's free checking account, then maybe the account interest is low, or maybe the connected credit cards have high interest, or maybe they do a hard push on loans, or... Basically banks are not charities - in the best case, the everyday banking is simply a loss leader for something else.
stevejones|9 years ago
This was ruled to be illegal and banks had to set up whole departments to process return claims. I suspect this is the main cause of the big headwind.
spjwebster|9 years ago
https://www.fca.org.uk/news/commitment-high-street-banks-ret...
eru|9 years ago
They also charged a fee for standing orders that didn't go through because of limited funds in your account. Instead of just ignoring them.
eru|9 years ago
viraptor|9 years ago
eru|9 years ago