Five reasons to hate banks

Robert Powell looks at five ways that banks get on our nerves...

What’s the best thing about your bank?

It’s probably not something you think about all that often. After all, banks haven’t exactly been in many people’s good books over the last few years.

That’s why it’s no surprise that new research has found that over 10 million bank customers cannot find a single reason to recommend their bank to someone else. The figures from Triodos Bank also show that 40% of the country is dissatisfied or indifferent towards their bank.

So in light of these new stats I’m going to look at five reasons why we are right to harbour such disdain towards our banking sector...

Overdraft charges ?

As we reported in the The overdraft scandal, many banks have now begun charging set daily or monthly fees for both authorised and unauthorised overdrafts.

Back in December Lloyds seem to perfect the art of giving with one hand and taking with the other by reducing unauthorised overdraft fees while simultaneously hiking up authorised fees. You can read the full details of the changes in Lloyds is ripping its customers off.

Granted, the easy way to avoid these charges is to simply steer clear of your accounts red zone altogether. But it still seems grossly unfair to increase charges for those who are just trying to manage their money well by arranging an overdraft in case of a pre-payday emergency.

Fortunately there are still a couple of current accounts which offer completely interest free overdrafts. Santander’s Preferred Overdraft Rate Account will match your previous overdraft up to £5,000 and is completely interest free for the first 12 months. But you will need to act fast if you want this account as Santander are planning on shelving it within the next month ahead of their big overdraft charge revamp.

If you don’t fancy banking with Santander (I’ll look at why you might not a bit later!), then the First Direct 1st Account offers a £250 interest free overdraft but you will need to pay £1,500 into the account each month or take out another First Direct Product.

Poor savings rates

Having a pop at the banks about their paltry interest rates on savings accounts does seem a little unfair considering the Bank of England Base Rate has been at a record low of 0.5% for almost two years now. But as we reported in The seven sneakiest secret financial tricks the dark art of the variable bonus rate continues to annoy savers up and down the country.

For example the Santander eSaver looks like an impressive account with a headline interest rate of 2.9% with a 12 month bonus rate of 2.4%. But when you consider that the overall 2.9% consists of a variable bonus and variable standard rate, you realise that Santander could still slash your rates whenever they liked!

Other 2.9% accounts, like the Post Office Online Saver which boasts a fixed 12 month bonus of 1.25%, are slightly better but still have a variable standard rate. This means that, in the Post Office case, your interest rate could only be slashed to 1.25% - but this is hardly worth getting excited about, with inflation at 4%.

Plus, some banks are actually guilty of slashing their savings rates while the base rate remains level. Boo hiss!

All this means that, in my opinion, if you’re after a good easy-access savings account, you’re better off going with the 2.8% AER ING Direct Account. This may be slightly less than the 2.9% market leading rate but it is fixed for 12 months and has no bonus element built into it. Or alternatively you can head over to our Saver Centre to compare all of the market leading accounts.

Credit card rate jacking

While the low base rate is predictably spelling misery for savers, it should – on paper – favour those of us who enjoy frequent outings with our flexible friend. But the banks seem to be having their cake and eating it too – as credit card interest rates are currently averaging at 18.9%; that’s a 13 year high!

What’s more, these rising interest rates are not just impacting on new customers. Many existing card holders are falling victim to rate-jacking as lenders decide to up the interest rates for customers with credit histories that are not completely spotless.

Fortunately you can fight back against rate-jacking by rejecting the interest rate rise and paying off the full balance within a ‘reasonable period’ or moving your credit card burden over to another account.

If you do choose to shift your debt you’ll want to find a card with a lengthy 0% period on balance transfers in order to minimise interest charges. Barclaycard are the current market leader with a 17 month 0% card but MBNA and Virgin are close behind; both offering 16 months at 0%.

Just remember that Barclays and Bank of America (which issues MBNA and Virgin cards) will not accept balance transfers from other cards they issue. But there are plenty of other 0% cards that are not issued by these two banks – head to 20 top 0% balance transfer cards for a full list.

Bad customer service

Out of the 10 million bank customers who wouldn’t recommend their bank to someone else, 38% cited poor customer service as the main reason. Yet oddly, despite this disappointment only 6% of people chose their bank based on its customer service.

We’ve frequently written about the problem of poor customer service at banks and you’ve also been keen to put the boot into banks that you feel aren’t up to scratch when it comes to dealing with complaints and queries.

Unfortunately for the banks in question, it’s always the same names cropping up on the naughty lists. As was proven in a previous article, just the word Santander seems to make the blood of lovemoney.com readers boil. But it was actually Bank of Scotland that placed bottom in Which?’s survey of customer satisfaction, closely followed by Halifax and then Santander.

Banker bonuses and pay

Perhaps the most high profile and media friendly reason for hating banks is the astronomical levels of pay and bonuses high flying bankers earn nowadays. Just today Barcap, the investment arm of Barclays announced bonuses amounting to £2.6bn. While the average salary for the 24,800 bankers working at Barcap is estimated to be £236,000; that’s around ten times the average UK salary!

The research from Triodos Bank shows that these whopping salaries do affect how the average bank customer views their bank. 37% of those who said they wouldn’t recommend their bank to a friend cited financial excesses and hefty bonuses as the reason.

But is that a valid reason?

Barcap may have paid out £2.6bn of bonuses this year, but profits in the division did almost double to £4.78bn and let’s not forget that – as a whole – Barclays paid £2.8bn of tax into the UK coffers last year.

Plus, some of the staff at banks who get bonuses earn average salaries - let's not forget about them.

What do you think?

Can we honestly say that we really hate the banks? Or do they do more for this country than we gove them credit for?

Let us know your thoughts in the comment box below.

More: The bank that most rewards loyalty | The seven sneakiest secret financial tricks