What ever happened to simple banking?

5 March 2012

Today, the financial press is abuzz with news of Santander’s new current account. Its 123 account has been described as “innovative”, “unique” and “extremely competitive,” depending on which news story you read. But the word that really sums up this account is ‘complicated’.

It offers a tiered interest rate, a complex cashback system and a punitive set of overdraft charges. If your balance is more than £1,000 you’ll get 1% interest, more than £2,000 and you’ll get 2% interest, and if you are silly enough to keep more than £3,000 in your current account you’ll get a 3% interest rate.

If you have more than £3,000 sitting around you’d be far better off putting it into an ISA – Santander offers an instant access ISA paying 3.3% tax free. Or if you’ve used up your ISA allowance you could get a rate of 3.4% by putting your money in Allied Irish Bank’s One Year Bond.

As for the cashback, you’ll get 1% returned to you from what you spend on water bills and council tax, 2% cashback on electricity and gas bills and 3% on mobile, home phone, broadband and paid-for TV packages. For the average person this will equate to annual cashback of £72, according to uSwitch.com. But the account comes with a monthly fee of £2 so once you deduct this the value of the cashback falls to £48, or just £4 a month. 

So far, so good, but if you really hunt through the promotional material for the 123 account you eventually get to the overdraft fees. I don’t think there’s anything wrong with banks making a bit of money from people who don’t manage their finances properly but charging £5 a day, capped at £95 a month, for going into an unauthorised overdraft is extortionate and makes the Santander account one of the most expensive in terms of overdraft charges. Even if you go into an authorised overdraft you’ll pay £1 a day (capped at £20 a month). So a little dip into the red can quickly wipe out all the benefits of the account.

I already spend enough of my time checking my savings account is still paying a decent rate of interest, making sure I’m not breaking any ISA rules and checking that my mortgage rate isn’t being quietly raised. The last thing I need is to spend an evening going through my bank statement making sure I’ve been given the cashback I’m entitled to and worrying about going £5 into the red and getting clobbered with a  £95 fine.

All I want is a current account where I can access my money for free, complete transactions quickly and efficiently, where my money is safe from thieves and where, should something go wrong, I can pick up the phone and speak to someone who understands and isn’t consulting a script.

I don’t need a decent interest rate on my current account, the money that sits in it is transitional, I’d far rather get no interest on that in return for a higher rate on my savings accounts. 

I don’t want my bank to offer me measly amounts of cashback when I pay my extortionate household bills – I can shop around separately for the best deals on my these and save far more. I’d rather my bank just didn’t rob me blind if I dip into the red every once in a while.

Research last week from National Numeracy found that half of adults in this country have the numeracy skills of an 11-year-old. Yet, when Which? recently ran a series of tests to see if bank charges were too complicated a person with a PhD in maths couldn’t correctly work out the overdraft charges for eight different banks. So when banks offer complex products they really are attempting to take sweets from a baby. 

So what am I going to do about this? Vote with my feet. I spent years bouncing from current account to current account getting all the headline-making deals. I made £300 in one year just from switching accounts. But ultimately it was too much hassle. Now I have a straight-forward current account that offers me no benefits except for good service and straightforward fees and charges, and I’m going nowhere.