Business banking news review: week ending 17 Oct 2013
The one-two punch of high overdraft fees and abysmally low interest rates on savings accounts is wreaking havoc with Brits with no end in sight.
I don’t know about you, but I’m getting tired of the way UK personal and business bank account providers are treating Brits at the moment. This week there was even more evidence of banking gone awry, as reports of not just pitifully low interest rates emerged but also overdraft fees that are so high as to be crippling.
In fact, a consumer campaigner discovered that many banks and building societies charge so much on authorised overdrafts that the payday lending industry is actually competitive and perhaps even a reasonable alternative! If you’re unaware, payday lenders charge exorbitant amounts of interest on short-term, small scale loans of around £100 or so, with an annualised interest rate in the thousands of percentage points – hardly an attractive option.
Meanwhile, banks like Halifax and Santander are charging nearly the same amount for their ‘affordable’ overdraft services. Dipping £100 in the red can see you being charged anywhere between £20 and £30 for a month, which is on par with big-time lenders such as Wonga or QuickQuid.
Meanwhile, interest rates are so damned low right now as to be criminal, what with the Bank of England stubbornly clinging to their 0.5 per cent base rate. This rate, which controls the rates of every lending and savings product in the UK, is unlikely to change until at least 2016, and for what it’s worth this means that the rates of return on savings accounts in the UK will remain well below the inflation rate for the next few years.
This is absolutely bloody disastrous for anyone trying to make their savings pot grow right now. After-tax returns from even the most lucrative savings product simply isn’t enough to counteract the slow erosive effects of inflation on their deposits, so in essence your money is worth less at the end of a year than it was when you originally deposited it, since the cost of living is rising more quickly than the figures in your bank account. This makes it absolutely impossible to save money for the future, but the Government seems to care little to nothing about that. I don’t know about you, but I’m just going to start stuffing my mattress with banknotes, as the difference is just about negligible!