Martin’s Blog…

I’m rather amused to read today the “bank charges reclaiming may be the end of free banking” story flooding the press. It does feel a bit like the “we’ve been pushing this positively for some time, so now let’s have a negative version” reaction. Obviously as 2.8 million template letters have been downloaded from the bank charges reclaiming article, I take this a bit personally and I’ve been involved in this from almost the beginning (see bank charges reclaiming history). So let me run you through the facts.

1. The OFT has made an announcement. The OFT has said it thinks ‘free banking’ isn’t transparent and will investigate. Well done, OFT: I hate the term ‘free banking’ it should be ‘fees-free banking if you’re in credit’. Yet sadly, the OFT, even once it investigates, can’t rule: all it can do is give its opinion, then take banks to the court. While it could get a ruling against bank charges (as they’re unlawful), I’d be surprised if it got one on fees free banking - I can’t see the legal issue.

2. Real profit is from lending at 18% and paying 0.1% in savings. While bank charges are profitable, banks really make their cash from only paying us 0.1% when we’re in-credit and lending it back at up to 18% on unsecured debts - a very profitable game. Bank charges account for £1-2 bn a year it’s estimated - yet bank profits were £38 bn last year and the year-on-year increase alone was £5bn. And of course no one is demanding an end to bank charges, just saying they’re unlawful because they’re too big - I’d be happy with a £2-5 charge rather than the current £30ish.

3. Banks don’t have to pay bounced cheques. The idea ‘people are unfairly taking the banks money’ is nonsense. Banks have two limits when you go beyond your authorised overdraft; the ‘paid’ and ‘unpaid’ limit. This means internally they allow you to keep taking money out up to a further limit. The system is designed this way so that they can levy these profitable fees.

4. Free banking isn’t going to end. The only change we’ve actually seen is from First Direct and the prime reason for that is to try and get rid of many of its dormant accounts - not due to bank charges. No other bank has started charging fees in-credit and many have already pledged they won’t. Yet let’s not let the evidence get in the way of a good story. In fact the competitiveness of the market and the fact this’ll prevent the end is the one thing the British Bankers Association and I agree on. The best bank accounts currently pay 6.5% in-credit interest and give 0% overdrafts fees-free.

Yet let’s suppose the OFT’s intervention could swing it in some way that’s not predicted - but that’s not due to bank charges, it’s due to the OFT’s view.

5. Blame the banks. Remember this is all about the banks making unlawful charges, so why blame the campaigners trying to put it right? Surely it’s the banks we should be blaming.

So my clarion call is simple, reclaim, reclaim, reclaim!

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How annoying. I was doing my regular phone-in on Vine today, presented by Julian Worricker as Jeremy is away. It was an ‘open MoneySaving’ phone in. Now these are always a little scary, as there’s no way to prepare, I just have to hope. Yet normally I manage to cope. Today all went well: best cash ISAs, bank charges, what to do with equity release, and many more were easy.

Then the dreaded happened: “can you get annual travel insurance for someone aged 79?”. The answer I knew, it was yes, but I blanked on the cheapest; and had to get someone to print the cheapest travel insurance article off for me. It was Help the Aged and Bradford & Bingley. I’m very annoyed; it’s the first time in three-and-a-half years I’ve blanked on any question. I must be getting old!

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PS. Julian found it funny that when asked questions which require naming products like listing the best cash ISAs, I close my eyes - what I actually do is visualise my article as I’m talking so that I can reel it off. Apparently this looks quite funny while I’m talking in an animated way.

Next week tom Brennan is due in court against Natwest about bank charges. He’s a junior barrister who ran up charges and, while NatWest has offered a settlement and put money in his bank account, he’s trying to force the bank to pay exemplary damages (in other words big compensation on top) of the fees. I must say while I admire his gumption, I’m in two minds as to whether it’s a good or bad thing. Let me give you my mullings (though I’m open to persuasion)

1. If it ain’t broke don’t fix it. Currently everyone who takes it to the final level, gets a payout: the banks have never defended so if you follow the steps in the Bank Charges Reclaiming article correctly you should get all your cash back. Will a court ruling help this? Well it may give surety, but we pretty much have that; the banks haven’t defended yet and obviously by Mr Brennan’s efforts don’t want to. A ruling may also mean a lower payout, as all recognise that the banks should be allowed to make a proportionate charge.

Thus a court ruling doesn’t really seem to help the campaign. My main worry isn’t about the courts; it’s about all the people who won’t do this. Many who are illiterate, innumerate, don’t have web access, or have mental health issues. A court ruling won’t really help them. We need the politicians to intervene and say “the banks took people’s money unlawfully without asking, they should give it back to all without being asked”.

2. Are exemplary damages fair? This is difficult for me, my reason for joining this campaign - after I was approached by Dave Smith (of the Consumer Action Group) way back in 2006 - was that the situation with charges is unjust, unlawful and hurts people’s finances. Redressing that balance is what this is about, and stopping the dreadful snowball effect that charges can have. The aim is to help people back to the position they should’ve been in if they hadn’t had charges at this unfair level - so that is getting the charges back, getting any lost interest, and any ongoing other financial impact being sorted.

Yet by exemplary damages we risk people actually being rewarded for having had charges; being in a better position than if they’d never had them. For me this is about justice not grabbing. Hence why I’m debating the concept.

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I’ve just read about an act of kindness, gentleness and caring to from one person to a complete stranger who was in distress, who I just met in the Chat Forum. As it’s a new and raw situation, it’s not appropriate to write about it now; but it’s prompted me to tell about a prior occasion that reflects similar values, that I was unable to write about then (I’m going to change some minor details to protect identities).

A few months ago I received a message from one of the forum posters, to tell me his story. He’s a single father with three children, who’d lost his job. The debts had piled up and there was a clerical delay in getting payment from social services. He was in the Debt-Free Wannabe Forum asking for help and advice. Sadly the problems compounded and it got to a stage where he had genuine worries about feeding his children.

This was compounded by the fact that with a lack of childcare and transport, the practicalities of shopping were difficult but the additional cost of online delivery thwarted that as a solution. One kind soul said she had a voucher for free delivery she would post to him if he sent his address. He did that, but instead of sending the voucher, she simply went online, ordered a week’s shopping to feed the family, paid for it and arranged the delivery.

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P.S. The joy of this for me is that it was unasked for and given without guilt or obligation from someone he’d never met. I would hate the forums to become a place where people start to come and ask for financial help from strangers, but sometimes you need to admire the sheer beauty of humanity.

P.P.S. When I say cry, I mean my eyes went wet and I got a flush of emotion; not some great balling wail - I’ve at least a modicum of masculinity to protect.

Should we cheer or growl? I’m happy reclaiming bank charges has become so widespread that money hungry profiteers on eBay are actually selling the templates on eBay. Yet I’m saddened those people consider this ethical. While I’ve no proof, the strong suspicion is the sellers didn’t draft the templates themselves or do the research involved, but simply copied those freely available from my Bank Charges Reclaiming article and/or other free activist sites..

Many people have e-mailed me to say “I think it’s disgusting, can’t you stop it?” Yet how? People are selling letters; they can subtly alter them so they’re not identical. In the past people have sold links to the Flightchecker on eBay, as well as other tools on this site. It’s the nature of the beast; my hope is people will learn to use web search or go for real recommendations rather than paying for something that shouldn’t be paid for.

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Just got a great e-mail from a pensioner who’s got a big rebate on his council tax after following the Council Tax Reclaiming article. In it he stated that in previous years he’s written to everyone: ‘Gordon Brown, head of the council, ministers, Uncle Tom Cobbley and all” to try and get his council tax reduced, but didn’t get anywhere… thankfully he’s now had a big reduction after getting his band lowered.

However I must admit, I had no clue what Uncle Tom Cobbley meant; the only Uncle Tom reference I know is from the book Uncle Tom’s Cabin, where it refers to a black man who is trying to ingratiate himself with the white community through disowning his heritage (sorry if my description is inaccurate, that’s to the best of my memory).

So onto the venerable Wikipedia where I find it actually means “et al” - in other words he’s tried everyone, plus it includes the lyrics of the original Devon song it derivates from.

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A few weeks ago I said we were about to launch the new look MoneySavingExpert.com and I wanted every to have a final look before it went live (see the note about it- although you can’t now see that version of the site, as it’s been taken down).

Well I read the feedback very carefully and most people really liked it. Yet a few comments really stuck out for me, such as “it looks a bit commercial”, “it looks like moneysupermarket” and “it looks like it’s advertising.” I tried showing the site to people who’d never used it, and whereas with the current site they immediately know it’s an editorial site about helping people take companies on and beat the system (and even with the clunkyness can see what it does), they weren’t so sure when looking at the new one.

So overall, while I know the new site was prettier and more functional, the feeling had changed and while existing users wouldn’t mind, it may put newbie MoneySavers off. After a sleepless night or two I told the MSE Towers team that I didn’t think we could go forward with it and would have to look again. Luckily, most of the new underlying code was done, so the changes we’re now making are far more cosmetic.

The idea of the new version is very much to keep the editorial feel and strength of the current site, but in a less cluttered and more modern style and with better navigation. So I thought I’d give you a sneaky peak (below) of the new new-look moneysavingexpert.com though there’s a way to go yet, much to be filled in (including the whole right hand side; don’t worry the stats section everybody likes will be there). We’ve also decided to scrap the fixed 800 x 600 width and go for a 1024 x 768 basic screen size (yet retaining functionality for users on 800 x 600) and increase the size of the ‘Forum’ button (which will be tweaked a little bigger than in the prototype below).

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THE DESIGN PROTOTYPE OF THE NEW SITE IS BELOW
THERE ARE MANY FONT, COLOUR, LAYOUT CHANGES TO COME.

(CLICK TO SEE IN FULL SIZE)

One in 20 children in the UK lose a parent before they reach adulthood (those are the best stats I’ve got, but if any actuaries know better pls let me know). Tragically, my sister and I were part of that unfortunate five percent, suddenly losing our mother just before I was 12. The grief, pain and sorrow are indescribable, and while thankfully as my father was the main breadwinner it meant there wasn’t a financial crisis, now I realise that this is plausible and possible- and would’ve added an almost insurmountable hurdle at a terrible time.

My reason for writing this note, is because this week I’m publishing my new Cheapest Life Assurance article; something thats always a little painful to write, but one I feel a passionate need to publish. Whenever a friend has their first child, I often comment on the importance of some form of life assurance, which provides a payout when someone dies. It’s an unpleasant subject to broach and many don’t deal with it simply due to that. Yet if you can afford it, it’s very much worth considering. Preparing for the worst is a must; you can give your children everything in the world while you’re there, but its also important to consider their future in the horrid event that you’re not.

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An ice-cream conundrum. This weekend the MSG and I were in Oxford and wanted an ice-cream, so we popped into Sainsbury. Sadly it was only selling ice-creams in the freezer section, not individually. So here’s the dilemma: we wanted a Magnum each and buying a supermarket box of three would be cheaper than finding an ice-cream seller to get one each. Yet as we were miles from home, we’d need to throw away the other Magnum, wasting the food and the packaging - which doesn’t really seem right. What d’ya do?

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I’ve just caught the end of a TV ad for a Capital One credit card; it includes one man advising his mate to “then cut it up into little pieces and get a capital one card instead”. I really wish people would move away from the idea that cutting up a credit card is the be-all-and-end-all solution. Yes, of course it stops you spending on it (though not if you still have the number, as then you can still spend on the web or phone); but at some stage you’ll be sent a new one.

The key, if you’re not going to use a card again, is to cancel it (having of course balance transferred the debt away), this really does close the card, it also improves your credit score in the long run (see should I cancel old credit cards article).

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When it comes to charity tickets, paying 10% more is more than worth it.

The MSG and I went to London Zoo today; we wanted to see if the new Gorilla enclosure matched up to what was said. The full ticket price (see London 2 for 1 for how to get it cheaper) is £16. During the very long queue to get in, I was intrigued to read £1.50 of this was a voluntary donation, and wondered why. My instinct telling me that as ZSL, which runs London Zoo, is a charity, it was something to do with Gift Aid (where you can make donations to charities and the charity gets to keep the tax (read the Give more to charity at no cost article).

When I got home, being the sad nerd I am, I decided to see if I could find some details about how it works. As you’ll see here (HM Revenue Charity Rules) this is all about when a charity can reclaim gift aid on tickets sales. By including 10% of the price as voluntary (and it must be obvious and stated) it can then treat the entire amount as a tax free donation under the normal gift aid rules.

So what does all this mean in practice? If ever you’re going to a zoo/museum/national trust property that has a voluntary donation of 10% on top, it’s worth genuinely considering the impact of not paying that donation.

A ticket is £10, which includes a £1 voluntary donation.
If you choose to pay the £9, the charity only receives £9.
Yet if you pay the full £10 the charity not only gets the £10 but can also reclaim £2.80.

In other words, by saving yourself 10%, you cost the charity 30%.

Now you may find this slightly at odds with the London 2 for 1 ticket loophole that I incorporated into the first line. Yet for me this is all about putting it into perspective. By using that system you save 50% and the charity’s income is reduced by 50%, but it is still maximising its revenue on what you pay. Yet by simply avoiding the voluntary donation, which is done for technical reasons anyway, you save a much smaller amount than it costs the charity - which overall isn’t an efficient use of the cash.

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I’ve always been slightly sceptical of blogs – funny you may think as I’ve got one. Yet for me the blog here is for musings; the hardcore stuff goes in the weekly e-mail and in the articles. Though I have just agreed to be one of the contributers to Consumer Central the new consumer blog as part of the Sunday Times.

It’s quite an interesting little spot and reaches a range of new people, plus I’m coupled with some very strong writers, including Paul Nuki, the editor of the Sunday Time Focus investigative division – so the opinions are diverse. The difficulty now is working out what I write there and what to write first. Luckily I was rescued with an obvious start point, the OFT’s decision to postpone its bank charges announcement.

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Having got a new Virgin credit card to shift debt to for the purpose of Stoozing (making free cash from credit cards for the unitiated) I was rather surprised recently to receive its text, “Hi did you know your 0% on Virigin credit card purchases ends 11/05/2007! So fill your boots while you can plus get 10% off loads of companies. Sweet!”

While the tone looks fun and sweet, this message is in my view both deliberately and nastily manipulating - and here’s why:

1. It should say STOP SPENDING QUICK the 0% is ending. The fact the 0% period is running out soon is a reason to stop spending, not start spending. While things bought on it now won’t attract interest, come June they’ll be getting on for 20%, so moving to minimise expenditure on the card is the key for most people. After all, if you’re interested in the 0% period, that means you’re not paying the card off in full each month, which means you’re probably still going to owe money in June.

2. ‘So fill your boots while you can plus get 10% off loads of companies. Sweet!’ Doesn’t this sound fun, yet actually look again and of course this is all about impulse spending. The limited range of goods on offer at 10% discount are not planned expenditure - again not something you want to borrow for.

3. And WORSE! My debt is a balance transfer. Regular MoneySavers will know where I’m going, but if not, this is one of the most devious things credit card companies do. I have a 0% balance transfer on the card, if I spend on the card, once the 0% rate for purchases ends, all my repayments will be prioritised on paying off the cheap balance transfer debts, leaving the expensive debts from spending sitting there, and I’d be unable to repay it unless I cleared the cheap debt. The extolling me to spend - would be hugely profitably for them - and very costly to me (for a proper explanation of how this works read the Best Balance Transfers article.

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