Your Banking Questions Answered
Got a question about your bank account? Or are you unsure how your bank has been affected by the credit crunch?
Here are answers to some of the most popular questions relating to bank accounts.
Q. I have a current account, a mortgage and a savings account all with the Halifax. Will I benefit from the HBOS/Lloyds TSB merger?
A. It is estimated that roughly two out of every five households in the UK are customers of the Halifax Bank of Scotland (HBOS) brand. But the announcement last year that Lloyds would be brought in to ‘rescue’ the bank has made its customers uneasy.
The good news is that whether you are a saver or a borrower, the impact to you should be minimal. Lloyds has no plans to scrap the HBOS brand, and the merger should help to make the new company even stronger.
Mortgage Holders
If you have a mortgage with HBOS, you will still be expected to make your repayments as usual. They have also pledged to maintain their lending criteria and to increase mortgage activity – including mortgages for first time buyers – once market conditions improve.Savers
If you have a savings account or an ISA with Halifax, again, you shouldn’t be affected by the merger. Your savings (up to a limit of £50,000) will be protected by the Financial Services Compensation Scheme.However, this limit applies to HBOS as a company, and this includes its other sister companies, such as Bank of Scotland, or subsidiaries such as intelligent Finance. If you have £50,000 saved in each of these three banks for example, the compensation scheme will only reimburse you a flat £50,000.
Q. My bank is bombarding me with literature telling me to switch to their new premier banking service, which will cost me £12 a month. Is it worth it, or should I stick to my current free bank account?
A. Firstly, remember that there is no such thing as a free lunch. Free banking is a myth, and according to the Office of Fair Trading (OFT), most banking customers are paying in the region of £150 a year for their current account already. You are already paying heavily for your ‘free’ service!
The OFT is not happy with the way that banks are charging customers for having insufficient funds in their accounts, and have calculated that banks are making upwards of £2.5 billion in authorised and unauthorised overdraft charges. The OFT is also recommending that stricter banking regulation should be brought in to put a stop to this.
So, banks are now getting their retaliation in first, but suggesting to their customers that they move to fee-paying accounts. Should their customers decide to do this, the banks will be able to recover some of the money they will lose from tighter overdraft charge regulation.
If your bank is recommending that you move to a fee-paying account, ask them what the incentive is for you to do so. You may find that the cost of ‘add-ons’ such as travel insurance or breakdown cover do not nearly cover the amount you are going to have to pay in monthly fees.
If you don’t think the fee is worth paying, think about whether you might be better off moving to a different current account provider.
Q. Should I try to reclaim ten years of overdraft charges from my bank?
A. Bank customers have complained about excessive overdraft charges for years, but in 2006 the OFT decided that customers might be able to prove that the fees they paid were actually illegal. In just over six months more than 100,000 people complained to the Financial Ombudsman and asked for their charges to be refunded.
Last year the OFT announced a test case that brought eight different bank account providers (HBOS, Lloyds TSB, HSBC, Clydesdale Bank, Barclays, Abbey National, RBS and Nationwide) to court in an effort to determine whether overdraft charges were unlawful and had to be repaid to complainants.
The banks are not going to admit defeat any time soon, as to do so could end up costing them billions of pounds in customer refunds. The case is still ongoing and is currently with the Court of Appeal. There will not be any more payments or refunds made to customers until the case is resolved.
You are well within your rights to make your own claim with your bank account provider. However you should bear in mind that the case is not expected to be resolved any time soon, and there’s no guarantee that the case will be judged in favour of customers.
In the meantime, there’s nothing to stop you lodging a complaint with your bank and looking to take your account elsewhere, to a bank that offers a competitive rate of interest and without punitive overdraft charges.
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